Soybean oil prices to rise 4% in 2022 against increased demand for biofuels

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

Reports that Omicron’s symptoms are less severe increase risk appetite, but it’s too early to get carried away. For one thing, we’ve seen this on a number of occasions since the first news broke just over a week ago. The markets have grabbed the headlines and this is just the latest rally following a few positive reports.

While this may be the first in a slew of positive data surrounding the new variant, it could also be the anomaly and the following could explain why world leaders and various agencies are so anxious. Hopefully for the former, but I expect extreme caution to remain until the data gives us more optimism.

Weeks like this, economic data would still play the second fiddle, but it turns out that looks a bit thin on that front and central banks are in the same position as the rest of us. So the rest of the week will remain very much focused on Omicron’s headlines, which will likely mean a lot more volatility.

By then, we may know a lot more, which means the conversation can move on to the monetary response. Sadly, it 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 are going to find themselves in a terrible position, which could tip the boat somewhat.

Oil rebounds as Saudi Arabia raises prices

Oil prices rebounded on Monday, up more than 2% after coming under severe stress last week. Reports that Saudi Arabia have raised crude prices are apparently behind this move, although I am not entirely convinced. Of course, this portrays confidence in the markets, but it does not change the uncertain outlook in any way. 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 onerous 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 how well the lows will be tested in the interim, if at all. The determination of producers has already been tested time and time again.

Gold remains under pressure as dollar soars

Gold remains under pressure as US yields at the shorter end of the curve and the dollar continue to rise. 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 how much of a threat Omicron will be and what the monetary response will be.

It found some support around $ 1,760 at the end of last week, where it has done so several times since mid-October. A move below here could bring attention back to $ 1,720 and then $ 1,680 which would be around this year’s lows.

Bitcoin partially recovers after crash

Bitcoin has had a hectic few days, having been pummeled on Saturday before recovering much of those losses. Whatever the cause of 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 risky instruments on the upside during the day. Bad news about Omicron could really put her under pressure.


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Felix J. Dixon