OPEC+ is slowly turning into the villain for the global economic recovery. Higher oil prices are coming and the energy traders could easily see $90 oil on any surprise disruption to output, a colder autumn, or the unleashing of pent-up travel demand if COVID cases continue to fall.
OPEC+ ministers agreed to stick to the script and only increase output in November by 400,000 bpd. OPEC+ is not concerned they will lose the battle of market share to US shale and will fully take advantage of roaring demand and elevated prices this winter. The natural gas shortage is leading to increased demand for alternative sources of energy, and crude is the favorite one. Aramco CEO Nasser pointed out that 500,000 bpd of crude demand has come from the lack of natural gas. This has the potential to get very ugly for natural gas as the north is not even in winter.
Crude prices seem poised to head higher, but thin conditions in China and an overall risk-off environment may keep the rally on hold temporarily.
Gold prices are in for a choppy period as safe-haven demand on rising risks to the outlook are being countered by yield curve steepening bets that dampen demand for non-interest bearing assets.
Gold prices rallied after US trade representative Tai threw down the gauntlet against China for not living up to their parts of the phase-one trade deal. Safe-haven flows from tensions amongst the world’s two largest economies was an easy trade for bullion investors. Tai’s comments are more about posturing, but given the risk aversion session, it is no surprise US stocks continue to remain heavy.
Gold is still vulnerable to the downside if yield curve steepening accelerates this week.
Bitcoin momentum grows as Wall Street continues to show signs they are committing long-term to crypto and as new money continues to pile in. Bank of America has decided to launch a digital assets research coverage, which should solidify the belief that cryptoverse will only get larger.
It seems that confidence is steadily coming back into the cryptos as new money finds its way into the space. Seven straight weeks of inflows despite further pressure from Beijing and a regulatory gauntlet in the US, shows big bets are coming into cryptos.
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