WTI crude oil rallies above $65/barrel over a robust demand recovery

Posted on April 29, 2021April 30, 2021 by Vrasidas Neofytou

WTI crude oil contract extends recent massive gains into Thursday’s trading session, jumping by 2.5% to $65.30/barrel on growing optimism over signs of a higher fuel demand recovery for the rest of the year despite global pandemic-led demand concerns.

Brent crude underperforms WTI crude:

The international benchmark Brent crude posts the same upside momentum but with softening pace than its US counterpart WTI. Even though Brent’s price reached the resistance level of $70/barrel, the discount with WTI’s front-month contract was the smallest in more than a week, by $3-$4/barrel only.

The reason for the WTI outperformance against the Brent contract is that the OPEC+ alliance will start gradually easing their oil supply restrictions from May to July.

Crude oil demand and Covid-19:

The faster-than-expected Covid-19 vaccination campaigns in some of the larger oil consumer countries such as the USA, Great Britain, China, and some parts of Europe and Asia has enabled their economies to rapidly ease social restriction measures, allowing the demand recovery for gasoline, diesel, and other petroleum products to pre-pandemic levels.

China, which has managed to exit first from the devastating pandemic last year, has grown by more than 18% in the Q1,2021, recovering the demand for crude oil to pre-pandemic levels as well.

On the other hand, the energy investors worry about the resurging Covid-19 infections cases in India, the world’s third-largest oil consumer. India, together with Japan and Brazil have seen their Covid-19 cases rising to record levels, which could harm the oil demand.

OPEC’s & Goldman Sachs bullish oil demand outlooks:

WTI and Brent crude oil prices have gained more than 6% since Wednesday, following OPEC’s slight upgrade of its demand growth outlook for 2021 to 6 million barrels per day, while the group also expects global stocks to reach 2.95 billion barrels in July, taking them below the 2015-2019 average.

The US investment bank Goldman Sachs is forecasting the price of Brent to reach $80/barrel and the price of US West Texas Intermediate (WTI) to advance towards $77/barrel over the six-month period.

The bank forecasts a record jump in global oil demand, following the acceleration of vaccinations in Europe and an unleashing of pent-up travel demand, which will lead global jet demand to recover by 1.5 million bpd.

US dollar weakens across the board as Fed keeps dovish monetary policy

Posted on April 29, 2021April 29, 2021 by Vrasidas Neofytou

Greenback has been edging lower across the board following the Federal Reserve’s decision to maintain its dovish monetary policy for the foreseeable future despite any future upticks on inflation and improving economic data in the country.

Fed keeps dovish monetary policy:

At the end of a 2-day FOMC meeting, Fed chair Jerome Powell reaffirmed during a press conference that the central bank is not even close to considering tapering its bond-buying program yet, and it would hold key interest rates near zero, despite improving economic data in the country.

The central bank will maintain its dovish-accommodative stance even as the inflation rate passes above 2% driven by Biden’s $1.8 trillion fiscal stimulus, the improvement in the employment rates, and the progress in the vaccination campaign.

Market Reaction:

The DXY-US dollar index against a basket of currencies dropped to as low as 90.40, posting a nine-week low following the FMOC meeting on Wednesday night, before trimming some losses and bounce back above 90.60 during Thursday’s European morning session.

The greenback, which it considers as a safe store of value during uncertain times, extends its downside momentum started at the beginning of April (after it topped at 93.43), as the low-interest rates, the retreating bond yields, and the risk-on mood in the global stock markets, make it less attractive against the growth-led currencies.

As a result, the Euro rises to $1.2150, its highest since late February 2021, getting also support for the progress in the EU’s vaccine rollout, while the commodities-led currencies Australia, New Zealand dollars, and Norwegian crown hit their highest since 2018.

Canadian dollar continues its strength against the greenback, climbing to $1.23, its highest since 2018, driven by the elevating commodities prices and after the Bank of Canada started tapering its asset-buying program.

Precious Metals rise on softer dollar and expectation for higher inflation:

Gold and Silver gained 1% at $1.790/oz and $26.50/oz respectively, following the weakness of the greenback based on the prospects of higher inflation.

The dollar-denominated precious metals tend to benefit from falling US dollars, making them more attractive for buyers with foreign currencies.

Gold tends to attract buyers as a hedging tool against inflation since the massive US pandemic-relief stimulus measures grow the expectations for higher inflation rates.

Copper and industrial commodities rally to fresh records on improving demand outlook

Posted on April 29, 2021April 30, 2021 by Vrasidas Neofytou

Industrial commodities have been enjoying an explosive year so far, with prices flirting new multi-year highs, supported by the optimism around the successful vaccine rollout, and the global economic recovery.

Institutional investors have increased their bullish bets on Copper and other base metals since the global demand has surged to pre-pandemic levels coupled with the largest supply deficits in a decade.

Copper, which is the king of the industrial metals, has rallied towards 4.50 dollars per pound, hitting its highest level since 2011 over strong demand from China and supply constraints in Chile.

Most recently, Goldman Sachs has called Copper as the “new oil”, since the red metal will play a key role in the decarbonisation of energy systems and especially in the development of the electric vehicle market.

Electric vehicles use about four times as much copper as traditional internal combustion vehicles, while renewable energy uses five times as much copper as traditional fossil fuel power generation.

Climbing to fresh record highs, industrial commodities such as Iron Ore, Aluminium, Platinum and Lithium have been the best indicators for the recovery in the global manufacturing and construction activity after the pandemic.

Finally, Palladium climbed to 3.000 dollars per ounce for the first time, getting support from the robust industrial demand from the automotive sector, the reflation bets, and the weaker US dollar.

Bitcoin plunges below $48.000, Dogecoin losses 20% over Biden’s capital gains tax worries

Posted on April 23, 2021April 23, 2021 by Vrasidas Neofytou

Bitcoin and other cryptocurrencies extended their recent losses on Friday morning amid growing worries over US President Biden’s proposal to double the capital-gains taxes on wealthy Americans. Biden’s administration seeks to increase the capital-gains tax for those rich Americans earning more than $1 million to 39.6% from 20%, to fund his massive pandemic-relief fiscal stimulus.

Crypto investors have already faced a capital-gains tax in case the investors sell the crypto after holding more than a year. Hence, there is a rumour-speculation among crypto fans saying that the US Treasury Secretary Janet Yellen plans to propose an 80% capital-gains tax on cryptocurrencies.

Sell-off in Crypto assets:

The news around rising taxes triggered a hard sell-off in the crypto ecosystem which has continued its downward momentum towards 2-month lows, making the crypto fans wonder again, whether this dump is a correction or not.

The entire market capitalization of cryptocurrencies lost nearly $300 billion from $2.1 billion to $1.8 billion in just 24 hours, reflecting the sensitivity of the sector to the tax threats.

Bitcoin:

Bitcoin was trading near $48.000 during Friday’s morning session, down 11% on the day, which is the largest single-day percentage loss since January 2021. The recent losses of Bitcoin represent around a 26% drop from a recent peak of $64,829 reached on April 14^th.

The market capitalization of Bitcoin broke below $1 trillion this morning to $900 billion at its current price, nearly 20% lower from its highest of $1.15 trillion following the direct listing of cryptocurrency platform Coinbase in Nasdaq.

Ethereum:

Same picture in Ethereum, with its price trading near $2.150 on Friday morning, down 12% on the day so far, while its market cap dropped at $250 billion.

Dogecoin:

Dogecoin received the biggest hit among digital coins, dropping as much as 30%, breaking below 0.20 cents. The “Doge” coin, which was created as a joke, has been a very popular bet among young investors and retail speculators since its price has exploded in recent weeks by more than 400%, while Bitcoin has fallen 5% within the same period.

US dollar retreats from recent highs, while Euro, GBP, and commodity currencies rally

Posted on April 22, 2021April 22, 2021 by Vrasidas Neofytou

The weakening in the US dollar and bond yields, the faster vaccine rollouts, the prospects for global economic recovery, and the rally in commodities prices have been driving the currency movements across the board in April.

The US dollar dropped to its lowest level in nearly 2 months as bond yields retreated from their recent highs touched last month, despite the faster-than-expected economic recovery in the United States.

The DXY-dollar index has extended declines below the 91 mark, following the commitment from the Federal Reserve to keep its monetary policy “accommodative” until the US economy recovers from the recession.

Euro trades above 1.20 for the first time since early March, as investors grow more optimistic about the pace of vaccine rollout since the European Union has secured an additional 100 million doses of vaccine by Pfizer.

The Pound Sterling is getting stronger across the board, as the UK economy is expected to gain momentum from the successful vaccine rollout, the eased lockdown, and the reopening of pubs and restaurants.

Finding support from the rising crude oil and industrial metal prices, the commodity-linked currencies such as the Australian, New Zealand & Canadian dollars, Norwegian crone, and Mexico peso have climbed nearly 3-year highs.

Russia’s rouble slumped to monthly lows after US imposed new sanctions targeting the country’s sovereign debt, while the Turkish lira trades near yearly lows after President Erdogan replaced his hawkish central banker.

Bitcoin plunged 19% over AML rumours and bans in Turkey, while Dogecoin rallies

Posted on April 19, 2021 by Vrasidas Neofytou

The entire decentralized digital currency market hit hard over the weekend, driven by an unconfirmed Twitter report that the US Treasury Department could crackdown on money laundering using cryptocurrencies. Hence, some investors might have sold on the news of a power outage in China, and after the Turkish central bank banned the usage of cryptocurrencies in the country.

Bitcoin, the world’s largest digital currency dropped as much as 19% to $51.700 on Sunday morning, losing more than $10.000 in just an hour before bounced back near $57.000. Overall, Bitcoin has lost 12% since it topped at $65.000 on April 14, driven by the excitement surrounding Coinbase’s public listing in Nasdaq.

A similar picture in the Ethereum, the second-largest crypto asset, which also lost 18% to $2.000 during the intense sell-off, before pared losses stabilizing above $2.200.

The unexpected market sell-off triggered several margin calls on long leveraged positions in the crypto assets during Sunday’s trading session. Analysts assume that almost 1 million traders’ positions worth nearly $10 billion were forced to liquidate during the weekend, with 1/5 of them in just an hour alone.

Unconfirmed twitter report:

The crypto market crash was triggered by an unconfirmed report in Twitter from a supposedly credible source, claiming that the U.S. Treasury Department could be looking to crack down on financial institutions for money laundering using cryptocurrencies.

However, cryptos paired losses immediately as there was no confirmation on the underlining Twitter report from either US Treasury Department or any other media.

Power outages in China:

Another bearish headline was the report over a blackout in China’s Xinjiang region, which reportedly powers a lot of bitcoin mining. The power outage reminds a fundamental weakness of the crypto ecosystem that even though the cryptocurrency network is decentralized the mining of it is not.

Turkey bans cryptos:

Investors might have reduced some long positions in the crypto assets after the Turkish central bank banned the usage of cryptocurrencies in the country last Friday.

According to the central bank’s official announcement, the ban is due to several reasons including the lack of supervision mechanisms, central authority, and stability. Investors in Turkey should stop using crypto assets in payments, the provision of payment services, and electronic money issuance.

This ban will halt the increasing usage of crypto in the country. The decision will severely affect Turkey’s crypto market that gained traction as Turkish investors joined in the global crypto rally.

Dogecoin rally:

Despite the sudden downside pressure in the crypto market, Dogecoin continues its crazy upward trend, skyrocketing from $0.06 to $0.42 in just a week!!!! while its market cap topped near $53 billion.

Dogecoin was originally founded as a joke based on the 2013 “Doge” meme, at the time which involved a Shiba Inu dog, and it has found backers among the crypto investors.

Founding support from well-known investors such as Mark Cuban and Tesla’s CEO Elon Musk, the “Doge” has soared 80x in 2021 so far, and more than 160x since the beginning of 2020, while some of its early investors have become millionaires in a time of just a few weeks!!!

However, the rise of such a virtual coin without main usage, programmers, and backed technology has fuelled concerns of a bubble in the crypto market.