An easy OPEC+ meeting, metals and bitcoin rise

Oil

Today was the busiest day for energy traders.  It started with China’s Caixin Manufacturing PMI reading falling into contraction for the first time since April 2020.  The European PMI manufacturing data showed a mixed recovery, with misses from the euro zone and Germany.  The main event for the oil market was the OPEC+ meeting in Vienna.  It was widely expected that OPEC+ will stay the course and deliver production increases of 400K bpd despite upward 2022 demand revisions.

This was a rare easy meeting for OPEC+ that did not even last half an hour.  No surprises today, as OPEC+ ratified a plan to move forward with 400,000 bpd production increases.  The oil market will stay in deficit for the rest of the year with 2021 oil demand growth at 6M bpd.  The JMMC anticipates the 2022 oil market in 2.5M bpd surplus, which will likely prevent any price surges from getting out of control.

Prior to the meeting, crude prices tumbled after Russian Deputy Prime Minister Novak reportedly said Russia could raise its output above the OPEC+ quota.  Next year, the battle for market share amongst OPEC+ will intensify, but the posturing has already started.

Crude prices pared losses after the EIA crude oil inventory report posted a massive 7.17 million bpd draw, much greater than the analysts’ estimate of a 3-million bpd decline.  The report was mixed as jet fuel demand reached the highest levels since the end of last year, gasoline inventories rose as peak driving season ends, and production increased ahead of Hurricane Ida.

Metals

Base metals are falling across the board as traders start to worry about economic slowdown fears and after a Chinese industry group warned that aluminum’s recent gains were not justified by market fundamentals.  For base metals to rally, US stock market jitters need to disappear.  Copper continues to fall as economic slowdown fears intensify.

Gold eyes non-farm payrolls

Gold seesawed as investors processed a wrath of US data that provided a strong outlook for the economy but troubles in hiring.  The US dollar fell to a two-week low as currency traders started to price in stronger tightening cycles abroad.  Gold will continue to consolidate until this Friday’s labor market report.  After Friday, Wall Street will have a good handle on when to expect the Fed to make a taper announcement.

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