Crude steadies, gold higher despite rising Fed hike expectations

Energy

Gasoline prices rallied after the fourth largest refinery in the US had a major industrial accident.  The fire at the ExxonMobil plant in Baytown, Texas was extinguished safely and gasoline prices gave back almost half their daily gains.

Crude prices stabilized after a wrath of mostly positive COVID vaccine/treatment headlines in the fight against Omicron. The US economic recovery in 2022 still looks very strong despite fiscal and tightening uncertainty as it now carries an arsenal of vaccines and treatments to win the fight against COVID.  Novavax reported that its vaccine is effective against Omicron and the Merk Covid pill will be available early next year.

It seems all the major catalysts that await oil in the New Year lean towards higher prices.  This week, supply disruptions from Libya and Nigeria and a bullish EIA report have WTI crude trading comfortably above the USD 70 level.  The US is a net exporter again, diesel demand roared back, and stockpiles are dropping.

WTI crude will likely consolidate around the low-to-mid-USD 70s until OPEC+ gives a hint on what they will do at the January 4^th meeting on output or if a major development happens with Europe’s energy crisis.

Gold steady despite rate hike expectations

Gold prices are holding up nicely despite another round of US data that mostly supported the case for the Fed to raise rates in March.  Fed rate hike expectations have been constantly swinging over every data point and assessment over how omicron will delay parts of the economic recovery and potentially fuel more inflation.

Gold should have a strong 2022 as the risks to the outlook remain elevated and that will likely lead to more easing from Beijing, dovish Fed rate hikes in the summer, and a weakening dollar as investors bet on Europe’s growth potential.

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