Commodities & Crypto Update: Oil pares OPEC+ deal rally, Gold down on profit-taking, Bitcoin consolidates

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Oil

The post-OPEC+ deal rally is running out of steam.  Energy markets welcomed OPEC+ small hike of 500,000 bpd beginning in January and appreciate the flexibility to review it monthly.  As US coronavirus cases continue to hit record highs, it is widely expected for the crude demand outlook to remain soft over the next couple of months.  Now that we are behind the OPEC+ meeting, it is all about COVID-19 again.  The virus spread is slowing in the Midwest, but now rising again in the big cities.  Pfizer’s news that they had to halve their vaccine rollout plan for 2020 reminded everyone that a lot needs to go right for a successful vaccine deployment. 

Brent’s price rally hit the breaks just ahead of the $50 level and that should prove to be strong resistance.  WTI crude appears poised to remain in the $40s for the rest of the year. 

The back end of the WTI curve saw a signifant drop as many oil producers lock in their hedging positions. Vaccine optimism should keep the demand outlook healthy for 2021 and eventually the curve should steepen.

Gold

Gold has been on a rollercoaster ride following a disappointing nonfarm payroll report, downbeat stimulus comments from both White House Economic Adviser Kudlow and House Majority Leader Hoyer.  Kudlow did not provide any optimism that McConnell is willing to budge on state and local aid, while Hoyer noted that the $908 billion bipartisan proposal is the floor for stimulus negotiations. 

The likelihood is still high that Congress will deliver some relief before the holidays, negotiations will however drag on another couple weeks. Gold was able to tentatively breach $1,850 following the nonfarm payroll report but a choppy dollar and profit-taking ahead of the weekend that could deliver a Brexit trade breakthrough has investors unwinding safe-haven bets. 

Inflation risks will keep gold’s bullish medium-and-long-term outlooks in place, but as European geopolitical risks get taken off the table, short-term pressure could see prices consolidate between the $1,800 and $1,850 region.  

Bitcoin

Bitcoin continues its consolidation pattern with few specific cryptocurrency catalysts unveiled this week.  Bitcoin bulls will embrace the sideways action as in the past healthy rallies have followed if no major shifts occurred to fundamental outlook. 

The $20,000 level is proving to be massive resistance for Bitcoin and what should be concerning some crypto traders is that in FX the euro and British pound have been able to capture their short-term barriers.  If Bitcoin can’t breakout if the dollar has a sustained decline, institutional traders may temporarily become bearish.   

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