Comment of the Day
Video commentary for November 21st 2022
A link t today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: China COVID cases rise, copper eases back, dollar firms, gold eases oil reverses initial decline, Wall Street eases.
Saudis Deny Report of Discussion About OPEC+ Oil-Output Hike
This article from Bloomberg may be of interest to subscribers. Here it is in full:
Saudi Arabia denied a report that it is discussing an oil-production increase for the OPEC+ meeting next month, and said it stands ready to make further cuts if needed.
Crude futures pared earlier losses, trading 1.8% lower at $86.04 a barrel as of 5:18 p.m. in London.
“The current cut of 2 million barrels per day by OPEC+ continues until the end of 2023,” Saudi Energy Minister Prince Abdulaziz bin Salman said in a statement via the Saudi Press Agency. “If there is a need to take further measures by reducing production to balance supply and demand, we always remain ready to intervene.”
Oil futures earlier dropped as much as 6.1%, dipping below $85 a barrel for the first time since September, after the Wall Street Journal reported that the kingdom and other members of the group were considering raising output by as much as 500,000 barrels a day.
That would have been a major reversal after the Organization of Petroleum Exporting Countries and its allies decided in October to cut production by 2 million barrels a day. US President Joe Biden has slammed the move, saying it endangers the global economy and aids fellow OPEC+ member Russia in its war in Ukraine.
After an initial rally following the cuts agreement, crude prices have declined as the economic outlook deteriorates and China continues to grapple with Covid-19 outbreaks. OPEC twice reduced its forecasts for global oil demand, and Prince Abdulaziz has said the group will remain cautious due to “uncertainties” about the health of the global economy.
Saudi Arabia has already cut oil exports sharply this month to deliver on the OPEC+ agreement, according to data from energy analytics firm Kpler Ltd. The cartel’s next meeting is scheduled for Dec. 4.
Eoin Treacy's view - The oil market is very finely balanced so it is unlikely there will be a unanimous agreement to cut or increase supply. The global economy is slowing and China will be grappling with the coronavirus for at least the next 18 months. At the same time, European sanctions on Russian oil are due to go into effect in the next coupe of weeks and that is likely to be a significant source of volatility.
Gold, Copper Slip as Traders Favor Dollar on China Covid Worries Bloomberg
This article from Bloomberg may be of interest to subscribers. Here is a section:
Gold fell to the lowest in over a week as the dollar advanced amid concern China may reverse its lighter-touch approach to the coronavirus. Copper also fell.
Worsening Covid-19 outbreaks across China and the first deaths in Beijing for six months are stoking concerns that authorities may again resort to harsh restrictions. That would be bearish for the copper market, where a squeeze in global supplies just appears to be easing. US equities declined, while the dollar rose on haven buying, pressuring gold and copper as they’re priced in the greenback.
Commodities have been pressured in recent months by the Federal Reserve’s aggressive monetary tightening to fight inflation, with a gauge of the raw materials recording two consecutive quarterly losses by the end of the third quarter.
Traders are now waiting for fresh clues about the Fed’s interest-rate hiking path from the central bank’s minutes due on Wednesday.
San Francisco Fed President Mary Daly said that officials will need to be mindful of the lags with which monetary policy work, while repeating that she sees interest rates rising to at least 5%. Her counterpart at the Cleveland Fed, Loretta Mester, said she has no problem with slowing down the central bank’s rapid rate increases when officials meet next month.
Spot gold slipped 0.7% to $1,739.10 an ounce as of 4:06 p.m. in New York. Copper for three-month delivery on the London Metal Exchange fell 2.4% to settle at $7,880.50 a metric ton. All other main LME metals declined. The Bloomberg Dollar Spot Index gained 0.7%. Silver and palladium spot prices dropped, while platinum gained.
Eoin Treacy's view - The big question circling about China is how willing they are to tolerate deaths from COVID. The government has successfully instilled a deep sense of caution in the population about the threat represented by COVID and easing up on quarantine rules may not result in a large increase in mobility. As cases and deaths rise, the potential for a significantly slower return to economic activity is a base case scenario.
2023 Outlook: Bear with it
Thanks to a subscriber for this report from Goldman Sachs (NYSE:GS) which may be of interest. Here is a section:
Eoin Treacy's view - A lnk to the full report is posted in the Subscriber's Area.
The big question for investors is whether this is a cyclical or structural bear market. The exogenous shocks that come to mind are COVID, the response to it, and the Russian invasion of Ukraine. The private sector leverage is not focused in the consumer sector, but there has been extensive use of leverage in private investment, crypto and institutional investment areas not least in pensions and endowments.
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Eoin's personal portfolio: hedge short profits taken, trading short losses taken, investment positions initiated November 10th 2022
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.
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