US stocks were quickly getting their groove back as Omicron worries eased as the early COVID data showed cases remained mild in nature. Even on a day when a cruise ship reported at least 17 passengers tested positive for COVID, cruise ship stocks were soaring higher. The US economy, with the help of rising vaccination totals, will continue to reopen as people learn to live with the COVID.
Oil
Crude prices rallied on easing fears over the Omicron variant, a surprise RRR cut from China boosted risk appetite, and on foreign demand for the US strategic oil sale.
It appeared the major oil price selloff was over as the mid-$60s provided strong support and was accompanied by a steady reminder that the oil market would remain vulnerable to some shortfalls over the next couple of years. COVID and the ESG movement have accelerated that lack of investment in new wells and that should keep oil prices from dropping below the $60 level going forward.
Earlier crude prices were boosted on optimism that demand must be improving since Saudi Arabia raised prices. Over the weekend, crude was not dragged down after reports that a Norwegian cruise ship had a COVID outbreak with at least 17 cases. The entire cruise line industry was battered when COVID first arrived, but optimism has been growing that due to vaccine requirements, we were getting closer to learning how to live with the virus.
Shares of Royal Caribbean (NYSE:RCL) and Norwegian Cruise Line (NYSE:NCLH) were higher by at least 9%, prompting optimism that large parts of the economy would not need to shutdown over this next wave, given that over 70% of the population was vaccinated.
WTI crude tested the $70 level and the 200-day SMA but pared some of its gains. Crude’s next big move might be dictated by the dollar and might not have a clear trajectory until Friday’s inflation report.
Natural Gas
Warm weather has been sending natural gas prices sharply lower. I quickly had to go back to the house after mistakenly having my toddlers put on their winter coats yesterday morning. The supply situation across Europe and Asia has the natural gas markets very vulnerable to higher prices, but the short-term demand outlook was not warranting anything but softer prices. Natural gas should find some support well ahead of the $3 handle.
Gold
Gold prices were struggling as demand for safe-havens eased as early data suggested Omicron cases remained mild in nature. Gold was unable to muster up much of a rally after the PBOC cut the cash reserve requirement ratio as their debt-loaded property market continued its downward spiral.
Gold will face its true test later this week when a hot inflation report could seal the deal for an aggressively faster taper by the Fed. Treasury yields got their momentum back as optimism was growing the Omicron variant won’t lead to widespread lockdowns as early data suggested cases remained mild in nature.
Gold may consolidate between the $1750 and $1800 trading range.
Bitcoin
Too often I write about unexpected Bitcoin price plunges, but that seemed to be the norm. Confidence that the crypto selling pressure was over was far from over and that was why there was some fading in the Saturday rebound.
This unexpected crypto crash didn't mean the end of Bitcoin or bursting of what some call the biggest bubble ever. Excessive margin trading and a complacently bullish market were the culprits that let Bitcoin end up being vulnerable to what was almost a 40% drop from the record high of just a month ago.
The entire crypto space has been evolving and the focus for some was shifting from the good old store of value trade to which coin would be best for Defi, the metaverse, or even NFTs.
Ethereum was becoming the favorite holding for many crypto investors and that could gain momentum in the New Year.