Outlook
Oil-linked currencies continue to trade with sensitivity to Brent around the mid-60s. OIL to USD sits at 66.67, near 90-day highs and about 5.8% above the 3-month average (63.04), with a recent 12.9% trading range from 59.04 to 66.67. The backdrop combines Iran-related geopolitical risk, sanctions dynamics on Russia and Venezuela, and OPEC+ supply signals, all helping drive elevated volatility in oil and related currencies. CAD, RUB, and NOK remain particularly responsive to Brent moves.
Key drivers
- Iran tensions and protests, with market chatter of a potential U.S. strike, as reported by Axios.
- Sanctions on Russia and force majeure at Iraqi fields affecting global supply, noted by TradingNews.
- OPEC+ production increase of 137,000 barrels per day for December and a plan to maintain output into Q1, as reported by TradingNews.
- Rising U.S. crude inventories, signaling potential oversupply concerns, per TradingEconomics.
- Easing sanctions on Venezuela to boost oil supply, highlighted by Axios.
- Market volatility in oil pricing influencing currencies of oil-dependent economies (CAD, RUB, NOK), observed by markets.
What could change it
- A sharp escalation or de-escalation in Iran-related tensions or credible strike risk could push Brent and the OIL currency higher or lower.
- A material change in U.S. oil inventories (steep draw or larger build) could shift the direction of the OIL currency.
- An unexpected shift in OPEC+ policy (surprise cuts or larger increases) could alter the supply backdrop.
- A faster-than-expected demand recovery or a renewed risk-off/risk-on environment affecting USD and commodity currencies.
- A significant USD move that strengthens or weakens the dollar, capping or amplifying moves in oil-linked currencies.
Range
OIL/USD: 59.04 to 66.67
OIL/EUR: 50.26 to 57.03
OIL/GBP: 43.98 to 49.54
OIL/JPY: 9,139 to 10,499
