Riding out market volatility with the power of data

While geopolitical tensions, OPEC actions, and Trump's policies fuel uncertainty in oil markets, technology aids traders in navigating fluctuations, David Goldman, Head of Trading at Novion, tells OGN

- ABDULAZIZ KHATTAK

AS we say goodbye to 2024 and enter the second coming of Trump (pun intended), we can lookback on the previous year and look forward to what this year may have in store.

One thing we can be reasonably certain of, is that there will be no shortage of volatility.

Despite being in the midst of two global conflicts, and in a market dominated by headlines, actual price fluctuation throughout the year was relatively subdued.

The chart of 2024 Brent Crude Oil (Figure 1) shows that the 252-day historical volatility was relatively flat, with a peak of 31.30 per cent and a low of 25.63 per cent.

The closely followed 30-day rate even reached a low of 15 per cent in July, with many market participants at one point fearing the possibility of single digits! This unusual behaviour (given the global economic backdrop) was initially greeted with some scepticism by traders, who were used to seeing triple digit Brent at the very mention of 'conflict'.

What soon became apparent, however, was that apart from the Houthis causing some 'inconvenience' in the Red Sea, the supply of oil was pretty much unaffected, and, as a result, price acted in tandem.

Even more telling perhaps, is that despite the threat of World War 3 as the various protagonists lined up on either side, the price of Brent Crude actually peaked in Sept 2023 and has been in a downtrend ever since! Any semblance of rallies during that period was quickly put to bed by OPEC announcements that they were going to begin increasing production again.

And it was very much a case of 'from their mouth to the traders' ears', as the market sold off almost as fast as the announcements had come out.

IMPACT OF TRUMP ON OIL MARKETS

So we had a situation of geopolitical unrest, set against the looming presence of additional production...a recipe, as it turned out, for unusually quiet trading conditions.