Spotlight on OPEC+, gold eyes USD1850

Oil near highs as OPEC+ nears compromise

Oil prices are easing off a little following Wednesday’s rebound, just as OPEC+ appears to be edging closer to an agreement. Tuesday’s meeting was postponed by two days after a failure to find agreement earlier in the week but it seems they may have reached a compromise. Rather than a three-month delay to the two million barrel increase in January, a one-month is then expected to be followed by a gradual tapering of cuts in order to avoid the market going back into surplus.

This is roughly what was expected to come from these talks which will be why oil prices continue to trade around the highs. A three-month extension was always likely to face strong challenges, especially with prices at current levels leaving a big buffer below. Producers will be keen not to hand the advantage to US shale and this may be enough to achieve that, although signs are that it is already making a comeback.

An extension to the cuts combined with the positive vaccine news could continue to support oil prices over the medium term, as long as the shale rebound isn’t more aggressive than expected. WTI finds itself around USD45 at the moment, with Brent around USD48. Oil prices around USD50 will likely suit all concerned after a torrid year for the industry.

Gold faces strong resistance after rebound

Gold is enjoying a third day of gains after suffering big losses for most of November. The rebound appears to have been driven by stimulus hopes as talks resume on Capitol Hill, with the prospect of Fed and ECB easing this month likely doing it no hard either at these levels.

I’m less convinced about the rebound in the near-term, in part due to my pessimism around stimulus talks. Gold faces significant resistance around USD1,850, a level it repeatedly found support around over the course of the summer. A break above here could be encouraging. I’m not convinced at this point and think another test of the lows may come before any significant rebound in the yellow metal.

Bitcoin not giving up on festive treat

Bitcoin is continuing to struggle around USD20,000 but is having another push today. There’s a feeling of inevitability about this breakout, despite the corrective moves we’ve seen on approach to USD20,000 in recent weeks. This may be nothing more than profit-taking around a major psychological level that could make the eventual breakout all the more aggressive.

A move back below the late November lows may change the outlook in the near term but as we’ve seen in recent days alone, there doesn’t seem much appetite to let go and pass up the opportunity to break into uncharted territory and all the buzz that would create. I anticipate a good Christmas for cryptos.

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