🛢️ Oil's 2025 Comeback: Stronger Than Ever?

Good Morning!

The US continues to flex its economic muscle as we enter 2025, with all eyes on Friday's December payroll report. Trudeau's potential exit has the Canadian dollar dancing, while up in Japan, the Nikkei's taking a hit with yields at their highest since 2011. Meanwhile, China's services sector is showing unexpected signs of life, posting its strongest growth in seven months. Key events this week include Fed speakers hitting the circuit and fresh inflation data dropping from both the EU and China.

In today’s email:

• Oil: Kicks off 2025 with renewed strength

• Bitcoin: Almost back at $100K! 💪🏼 

• MiCA: Future of crypto regulation

• Gold: Ready for a higher leg up soon

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THE BIG IDEA

Oil kicks off 2025 with renewed strength, driven by Middle Eastern market dynamics and potential geopolitical shifts, while European gas markets face supply challenges

The energy markets are painting an interesting picture as we roll into 2025, and there's quite a bit to unpack here. Brent crude's pushing past $76/bbl, and here's the kicker – it's happening despite what should be a well-supplied market. What's driving this unexpected surge?

The Middle East's physical market is flexing its muscles, with Asian buyers pivoting away from Russian and Iranian crude amidst sanctions. The Brent/Dubai spread dipping into negative territory tells us this isn't just market noise – it's a fundamental shift in buying patterns.

Then there's the Trump factor to consider – his upcoming inauguration has markets on edge about potential stricter Iranian sanctions

If he decides to tighten the screws on Tehran, we could see a market that's significantly tighter than current forecasts suggest. Though interestingly, this could open the door for OPEC+ to step up their production game.

Meanwhile, Europe's gas situation is getting spicy. TTF prices flirted with EUR50/MWh last week after Russia pulled the plug on Ukrainian pipeline flows – a move that'll cost Europe about 15bcm in annual supply. While this wasn't exactly a shock (Ukraine's been crystal clear about not extending the deal), it's adding pressure to an already tight market.

Storage levels are sitting at 70% – notably below last year's cozy 85% and the five-year average of 76%. The forecast for colder-than-usual weather over the next two weeks isn't helping either, potentially accelerating storage depletion.

While we're not hitting panic buttons for this winter, refilling these tanks come summer will be a heavier lift than last year, which explains why summer 2025 prices are commanding a premium over next winter's futures. This shifting dynamic suggests we're in for an interesting ride in European energy markets throughout 2025.

MARKETS AT A GLANCE

TOP NEWS

China's bond yields hit historic lows as markets bet on Beijing's policy easing, while yuan faces mounting pressure despite central bank's concerns

All eyes on China's two-year bond yield as it flirts with the critical 1% mark, dropping a whopping 50 basis points in just two months. Meanwhile, the yuan's sliding past defended levels to four-month lows, testing Beijing's resolve. The contrast with the US couldn't be starker – their Treasury yields are surging despite rate cuts, while China battles deflation fears.

Apple faces mounting pressure in China as foreign phone shipments plummet 47% amid fierce local competition and AI feature restrictions

November's numbers paint a sobering picture for Apple in China, with foreign phone shipments nosediving to 3.04 million units. Huawei's dramatic comeback and Apple's delayed AI rollout in the region aren't helping matters. Even Tim Cook's diplomatic visits and upcoming Lunar New Year discounts might not be enough to reverse this trend.

Legendary crisis trader Steve Diggle returns to the markets with AI-powered volatility fund, warning of 2008-level risks ahead

Hedge fund veteran Steve Diggle, who pocketed $3 billion during the 2008 crash, is back in the game with a $250 million fund targeting market upheavals. Using AI to spot potential blowups, he's eyeing everything from tech bubble risks to China's shadow banking woes. His message? The market's fault lines are deeper than 2008, but protection's never been cheaper.

CRYPTO

Bitwise CEO forecasts 2025 as a transformative year where AI and tokenization revolutionize capital markets, particularly for smaller businesses

Bitwise CEO Hunter Horsley envisions a fascinating shift in 2025's crypto landscape. AI could spark an explosion of niche businesses leveraging tokenization, while more corporations might hop on the Bitcoin bandwagon. Add in potential M&A deregulation under Trump, and we're looking at a perfect storm for crypto's mainstream integration.

Gaming and Layer 2 Tokens Struggle in 2024 Amid Broader Crypto Gains

Despite strong performance across most crypto sectors, gaming and Layer 2 tokens faltered in 2024, with indices dropping 16% and 30%, respectively. TON, excluded from the gaming index, surged 100% on Telegram-based gaming. Layer 2 could rebound in 2025 with token launches from Linea and Unichain, potentially reinvigorating the space.

Navigating MiCA and the Future of Global Crypto Regulation

The MiCA framework sets a transformative precedent for crypto regulation globally, balancing opportunities and challenges for stablecoin issuers, DeFi integration, and traditional banks. CEO Anastasija Plotnikova discusses the evolving landscape, highlighting the need for fintech firms to embrace compliance while leveraging AI and embedded finance for accessible, seamless Web3 experiences.

Do Kwon Faces U.S. Justice as Korean Investors Applaud Harsh Sentencing Prospects

Disgraced Terraform Labs founder Do Kwon, extradited to the U.S., faces up to 130 years in prison for fraud, drawing approval from Korean investors who prefer the harsher American sentencing system. With over $40 billion in losses tied to TerraUSD and Luna, compensation remains elusive amid bankruptcy constraints.

GOLD

Goldman Delays $3,000 Gold Target to Mid-2026 Amid Fewer Fed Rate Cuts

Goldman Sachs revised its gold price forecast to $2,910 for 2025, deferring a $3,000 target to mid-2026. Fewer rate cuts and muted ETF inflows after the U.S. election dampened gold’s momentum. While central bank purchases remain strong, a slower Fed easing cycle and renewed inflation concerns keep gold range-bound.

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