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Hansen: Watch as oil market volatility spreads

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24 hours into a new trading year and Saxo's Ole Hansen says volatility in oil markets is already high and will remain so. Rising geopolitical tensions in the Middle East combined with disappointing Chinese data have hit all markets including crude, he says.

Despite the war of words, both Saudi Arabia and Iran are desperate for revenues so Hansen doesn't believe either will turn off the oil taps. 

The premium WTI gained before New Year has now disappeared, he explains, because the geopolitical risk premium has been priced back into Brent. He also points to Wednesday's US inventory report which could see increased supply.

Ole believes that both the upside and downside potentials remain limited. But the one thing traders can be sure of is continued volatility.