Crude prices are lower as the global economic short-term outlook is weighed down by persistent inflationary pressures and as OPEC+ anticipates a much smaller oil market deficit this quarter. The oil market deficit might only be 300,000 barrels a day this quarter, but the risks of a demand surge remain elevated.
Impressive earnings results from Exxon and Chevron showed the oil giants are overflowing with cash, but are redirecting that towards dividends and buybacks, refraining investments in new wells. Exxon is betting big on low-emission energy solutions. Chevron is not ramping up production and their capital budget next year will be 20% below pre-COVID levels.
The oil price rally looks like it is taking a break but the global energy crunch is still very vulnerable to price surges as the supply outlook will barely keep up with the improving reopening of the global economy. WTI crude has massive support above the $80 level and that should hold as long as no major action stems from COP26 over the weekend.
Gold is tumbling as inflationary pressures send global bond yields in Europe and Asia much higher, outpacing Treasury yields. The Treasury curve is flattening ahead of November 3rd FOMC policy meeting that will have Fed Chair Powell announce mission accomplished on reaching “substantial further progress” on both inflation and employment mandates.
Gold will start to form a range ahead of Wednesday’s Fed policy decision. A dovish taper announcement would be the best case scenario for gold prices. The Fed will likely be more effective than the ECB was in pushing back rate hike expectations. If inflation continues to run wild, gold prices will eventually see strong inflows as growth concerns trigger safe-haven positioning.
The Shiba Inu infatuation continues to take away attention that should be going towards Ethereum. Ethereum’s upgrade this week was successful and instead the focus across many social media platforms is whether Shib coin will make it to a dollar. Retail traders are fixated with the massive burn rates of Shiba Inu and debating how high it can go.
Bitcoin is comfortably back above the $60,000 level as many whales and long-term holders continue to show signs they are not going anywhere. Bitcoin’s path towards $70,000 is there and it could happen fairly soon if Wall Street continues to believe Bitcoin is a more effective inflation hedge than gold.
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