Home Markets Easing fears of the new virus helps Oil regain some of the lost ground

Easing fears of the new virus helps Oil regain some of the lost ground

by Prathamesh Mallya (AVP- Research, Non-Agri Commodities and Currencies, Angel One Ltd)
Dec 07, 2021
Easing fears of the new virus helps Oil regain some of the lost ground, Market, KonexioNetwork.com


On Monday, Spot Gold ended lower by 0.32 percent to close at $1778.1 per ounce. Gold extended its fall from last week as boost in markets risk appetite and a stronger Dollar dented appeal for the Dollar priced Gold.

Hawkish comments by US Federal Reserve Chair Jerome Powell pushed investors away from the bullion metals last week. Increasing bets towards tapering of the expansionary policy by the US Central bank and hike in interest rates pressured Gold prices.

Increase in Interest rate raises the opportunity cost of holding non-yielding Gold.

However, worries over impact of the Omicron virus on the global economy limited the fall in the safe haven asset, Gold.

Increasing US Treasury yield and a stronger Dollar might continue to pressure the bullion metals appeal.

Crude Oil

On Monday, WTI Crude rose over 4.8 percent to close at $69.5 per barrel as markets shrugged off worries over the new Omicron Variant. Oil regained some of its lost ground after Reports suggested that the Omicron cases had only been showing mild symptoms and the impact might not be that severe supported market sentiments.

The Organization of the Petroleum Exporting Countries and their allies, also known as OPEC+, stuck to its scheduled increase in production activities in the recent meet despite of the spike in Omicron virus  cases. (to add 400,000 barrels per day in January 2022)

The Oil exporting group also stated that it would review its production policy if the demand for Crude dropped following the impact of the new variant of the covid19 virus. OPEC+ is scheduled to meet in the first week of January’22.

Uncertainties over the impact of the virus might keep the global investors cautious in the coming weeks.

However, a stronger US Dollar reflecting expectation of a tighter monetary policy might be a setback for the Dollar priced commodities.

Delay in return of Iranian Crude in the markets and easing worries over the new variant of the covid19 virus might support Oil prices in today’s session.

Base Metals

Most Industrial metals on the MCX traded lower in line with the international markets as the Dollar continued to strengthen; however, China cutting its reserves requirement in an attempt to support economic growth and Base metals demand levied some support.

Mounting uncertainties across China’s property sector and worries over the ties between US & China Pressured the Base metal prices last week.

Also, China's services sector grew at a slower pace last month reflecting the inflationary pressures and Covid 19 virus outbreaks.

Base metal prices found some support during the week as depleting LME Base metal inventories signalled towards a tight supply market.


On Monday, MCX Copper rose over 1.5 percent to close Rs.734 per kg despite of the bleak growth in China’s economy as mounting supply worries supported sentiments.

Las Bambas, one of Peru's largest copper mines, will shut down copper production by mid-December because of a road blockade. Las Bambas produces 400,000 tonnes of copper a year, or about 2% of the world's copper.

Supply disruptions in major Copper producing nation might offset the Stronger Dollar and support Copper prices.

China’s central bank working towards supporting their economy might levy some support to the industrial metal prices. However, the Dollar denominated industrial metals feel some pressure as Hawkish comments by US Central Bank continued to underpin the Dollar.