Commodities and Cryptos: OPEC+ Surprise, Gold lower, Bitcoin drifts lower

Oil

OPEC+ did it again… surprising everyone with a decision to keep the 400,000 b/d hike for January. Sharp oil price movements saw WTI crude plunge to $62.43 before recovering the majority of the slide. The Saudis certainly know how to keep energy traders on edge and this OPEC+ surprise decision sent oil prices on a wild ride. The decision to move forward with the January production increase will alleviate some of the mounting political pressures that were growing. Energy traders, yours truly included, got this OPEC+ meeting wrong as expectations were high that they could hold off on the January increase given both the Omicron uncertainty to the demand outlook and the SPR releases.  

The decision to keep the planned hike was accompanied with some protection as they could change their mind if further developments with the pandemic warrant a change in policy. OPEC+ seems optimistic about how bad of a hit crude demand will take from Omicron and that should be viewed as partially bullish.

Shortly after the decision, Iran poured some cold water on what was gaining momentum that Iran nuclear talks were going to be fruitful. Iran voiced pessimism over the Western intentions with resumption of talks. Secretary of State Blinken noted that we will learn in a day or two if Iran is serious.

The bottom appears to be in place for crude prices and that should remain the case unless several US states go into lockdown mode. 

Gold

Gold is lower after another low jobless claims report suggests the labor market recovery continues to head in the right direction. Even though the upcoming nonfarm payroll report won’t reflect the Omicron fears, the job market remains tight and expectations are high for another strong jobs number on Friday.

Gold won’t get its groove back until investors are confident the strong dollar move is over. If rate hike expectations continue to rise for the Fed, while getting pushed back for the ECB, that is bad news for gold. Gold will have a difficult time until we get past the December 10^th inflation report and the December 15 FOMC policy decision. Gold’s trading range is broadening, with short-term risks to the downside. If the dollar accelerates higher leading up to the Fed decision, gold may find major support ahead of the $1725 level. 

Bitcoin

Bitcoin is lower as many crypto investors see some rough waters ahead as profit-taking could settle in even further if risky assets are dealt a blow on rising Fed rate hike expectations. Bitcoin is up over 94% this year and it looks like it is not performing like an inflation hedge anymore. Another day of regulatory scrutiny yielded no new reasons to not be bullish long-term with cryptos. Bitcoin is stuck in the $54,000 to $60,000 trading range and that may last a while longer.   

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