Crude rallies, gold stumbles

Oil prices climb

Crude prices continue to rise and pleas to OPEC to increase production continue to fall on deaf ears.  The only thing that will get OPEC+ motivated is if private US operators signal, they will increase production.  OPEC+ has been enjoying rising prices, steady demand, and little fear they will lose market share.

Jet fuel demand is a small part of the demand equation but that will definitely get a boost now that the Biden administration will allow international travelers to enter the US if they have a COVID vaccine authorized by the WHO from November 8^th.  With US cases not seeing much of the spikes occurring across Europe and Asia, domestic holiday travel should be robust.  The return to school for children has not led to any significant surges that are straining hospitals.  Children as young as 5 also seem poised to get access to the Pfizer COVID vaccine.  The reopening of the economy could enter another gear and that could keep crude demand growth strong over the next couple of quarters.

WTI crude still has only one way to go and that is higher.  The oil market deficit that is in place won’t be changing anytime soon and that means a jump to USD 90 oil seems likely.

Gold

Gold is weakening as investors see little reason for safe-havens as stocks continue to make fresh record highs.  Well over a quarter of the way through this earnings season and over 80% of the S&P 500 companies have delivered earnings that topped expectations.  Gold may struggle in the short-term as risk appetite is running wildly and most of the inflation news has been priced in.

A strong dollar might emerge post-ECB and that could tentatively drag bullion down. Gold is forming a range with prices likely to trade through the USD 1800 level a little while longer.

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