Oil
Oil prices rebounded for two key reasons: the Omicron variant seemed like it would most likely be short-term disruptive to the crude demand outlook and on growing expectations that OPEC+ will refrain from increasing production by 400,000 bpd.
The Chairman of the South African Ministerial Advisory Committee on Vaccines noted that the cases so far had all been mild, mild-to-moderate which was a good sign. As long as South Africa does not see a massive uptick in hospitalizations, optimism will grow that this new variant won’t lead to a wrath closing of borders. Highly vaccinated countries will continue to thrive and political pressure will grow to get those countries with low vaccination rates more supplies.
OPEC+ pushed their meetings to better assess the impact of the Omicron variant, which will most likely be followed by a delay in delivering an extra 400,000 barrels a day in January. Following the global strategic reserve releases and the announcement of dozens of countries restricting travel to and from South Africa and neighboring nations, OPEC and its allies can easily justify an output halt, or even a slight cut in production.
Crude prices gave back some of its gains after the US State Department advisor reminded traders the US could release more oil.
Gold
Gold prices remained heavy as the Omicron panic eased, dollar rally returned, and after another round of strong US economic data. Wall Street was quickly shaking off last week’s de-risking theme that triggered safe-haven demand for bullion.
President Biden said economic lockdowns in response to the Omicron variant were off the table, which means gold could be in trouble if this latest variant mostly yields longer supply chain issues that might fuel the ‘inflation is persistent’ argument. If supply chain issues deteriorate even further, that could lead to faster tapering and quicker rate hikes by the Fed.
Cryptos
Cryptocurrencies were rebounding after last week’s widespread panic-selling from the Omicron variant blew past many stops. The crypto selloff was an overreaction and buyers were quickly reemerging as traders reassess the impact of a new coronavirus variant. Bitcoin was a part of Monday's broad risk rally that stemmed from easing COVID fears but will likely struggle to completely get its groove back until vaccine efficacy results in the coming weeks confirm highly vaccinated countries are going back to lockdown mode.
Bitcoin rose 3.5% to $58,284, which made the year-to-date gain at 101%. Ethereum was back above $4400 and was almost 500% higher this year. The top two cryptos seemed like they may consolidate here, but if the Fed accelerates their taper plans and prospects of rate hikes grow, a return to record highs seen earlier in November will be hard to do.