OPEC and its non-OPEC allies, known collectively as OPEC+, decided to raise its output target by 400,000 barrels per day from next month. The move had been broadly expected given U.S. pressure to boost supply and no major new Covid restrictions.
Led by OPEC kingpin Saudi Arabia and non-OPEC leader Russia, the energy alliance is in the process of unwinding record supply cuts of roughly 10 million barrels per day. The historic production cut was put in place in April 2020 to help the energy market after the coronavirus pandemic cratered demand for crude.
The S&P 500 gapped down Monday on a few headlines, namely negative Omicron news. Monday gap-downs are often filled within one to two days as the market is found to have overreacted. This was indeed the case again as we are seeing the market entering Wednesday above the Friday close. It also helped that the October 2020 trend-line was there in confluence with the headlines.
It isn’t stepping too far out on a limb to stay we are on path to test or break the old record highs. There is a bit of a ceiling around 4720, with 4743 as the record high. Seasonality, “Santa Claus Rally”, is favorable for the market.
The SPX may get stuck and unable to climb above a relatively stiff wall of resistance, and if this turns out to be the case then an ascending wedge could continue to mature into January where an explosive move may then unfold.
For now, the general trading bias appears neutral at worst, most likely bullish until we see a material breakdown. A turn down towards the October 2020 trend-line could offer up another dip-trip opportunity for would-be longs.
The Reserve Bank of Australia said tapering its bond buying program at the first meeting of 2022 and ending it in May is consistent with existing forecasts, as policy makers presented an upbeat view of the economy.
The RBA’s board discussed two other options for quantitative easing: it could cease purchases in February if better-than-expected progress was made toward its employment and inflation goals, according to minutes of the Dec. 7 meeting released Tuesday. The third option was to taper in February and review again in May if progress was slower.
Trade accordingly with your risk.
Australia’s strong labor market rebound signals the economy is rapidly recovering as the country lifts coronavirus restrictions, Treasurer Josh Frydenberg said Friday.
The country added a record 366,100 jobs in November, eclipsing market forecasts for a 200,000 rebound, data from the Australian Bureau of Statistics showed Thursday.
Frydenberg underscored the recovery has been broad, with jobs added across a range of sectors. The jobless rate dropped to 4.6%, from 5.2% in October, well under forecasts of 5.0%.
On Thursday, Reserve Bank of Australia Governor Philip Lowe said the labor market was expected to tighten further over the next couple of years. He also said the RBA’s “central scenario” is for the jobless rate to reach 4.25% by the end of 2022 and 4% by the end of 2023.
Trade accordingly with your risk
The investment bank’s head of energy research, also said Friday that oil at $100 per barrel was a possibility. Oil demand was already at record levels before the latest omicron variant hit, and furthermore, demand for air travel should continue to recover, he said.
The first is that costs go up as oil companies ramp up production. “There’s inflation, everywhere else in the economy, and eventually there’s inflation in oil services,” he said.
The other possibility is if the supply of oil can’t meet the demand as global economies reopen from the pandemic.