Soybean Oil Prices Will Rise 4% in 2022 on Growing Biofuel Demand

Stock markets are off to a positive start to the week in Europe and the US, in line with the price action we’ve seen over the past week since the discovery of the new variant.

Reports that Omicron’s symptoms are less severe are whetting the appetite for risk, but it’s too early to get carried away. For one thing, we’ve seen this many times since the news broke just over a week ago. Markets have been very headline driven and this is just the latest rally on the back of positive reports.

While this may be the first in a series of positive data around the new variant, it could also be the anomaly and what follows could explain why world leaders and various agencies have been so anxious. Let’s hope for the former, but I expect extreme caution to remain until the data gives us reason to be more optimistic.

On weeks like this, economic data would always play second fiddle, but it turns out that it looks a little thin on that front and central banks are in the same position as the rest of us. So the rest of the week will continue to be very focused on Omicron headlines, which will likely mean a lot more volatility.

By then, we may know a lot more, which means the conversation can shift to the monetary answer. Unfortunately, that comes too late for the RBA and BoC tomorrow and Wednesday, respectively, and maybe just in time for the Fed, ECB and BoE next week. If the news is not good on the variant, central banks will find themselves in a terrible position, which could rock the boat somewhat.

Oil rebounds as Saudi Arabia raises prices

Oil prices rebounded on Monday, up more than 2% after coming under significant strain last week. Reports of Saudi Arabia raising crude prices apparently drove this decision, although I’m not entirely convinced. Of course, that depicts confidence in the markets, but that doesn’t change the uncertain outlook. I think it’s probably just a rebound in risk as seen elsewhere.

Ultimately, the most bullish thing for prices is that Omicron would be less severe and if more good news follows, we can all relax a bit and the downside risks to the economy will ease. If the good news does not follow, OPEC+ will cut production and support prices that way. The question is to what extent the stockings will be tested in the meantime, if at all. The determination of producers has already been tested time and time again.

Gold Remains Under Pressure as USD Climbs Higher

Gold remains under pressure as US yields at the shorter end of the curve and the dollar continue to climb. As is the case with all other asset classes, the yellow metal will remain extremely sensitive to developments over the next two weeks as we learn just how much of a threat Omicron will pose and what the monetary response will be.

It found support around $1,760 late last week, which it has done repeatedly since mid-October. A move below here could see focus shift to $1,720 and then $1,680, which would be around this year’s lows.

Bitcoin partially recovers after crash

Bitcoin had a turbulent few days, having taken a beating on Saturday before recouping much of those losses. Whatever caused the flash crash, it failed to fully reverse the losses and remains below $50,000. This could make it vulnerable in the short term, especially as it struggles to follow other upside risk instruments that day. Bad news about Omicron could really put him under pressure.

Steve R. Hansen