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Kremlin: Russia and US have a shared interest in stabilising the energy markets
The Russian government sees the lifting of U.S. sanctions on its oil as an attempt by Washington to stabilize global energy markets. Washington's waiver of sanctions on Russian oil is an effort to stabilize global energy markets. The two countries share a common interest in this. Treasury Secretary Scott Bessent announced that the United States had granted a 30-day exemption to 'countries' to purchase Russian oil and petroleum product currently at sea. This was done to stabilize global markets roiled by Iran War. Peskov stated that stabilisation of the market is impossible without a significant volume of Russian oil entering the market. "We are seeing actions taken by the United States to try and stabilise the energy markets. "Our interests are similar in this regard," he added. The U.S. government's latest effort to tame the energy prices after U.S. and Israeli attacks on Iran paralyzed shipping through the Strait of Hormuz was the second significant rollback of Ukraine-related U.S. Sanctions in less than a week. Peskov stated that there was a chance the global energy crisis would escalate. He said that such actions would, "of course, to some extent" help stabilize the market because, "without significant volumes Russian oil, it is impossible for market stability." (Reporting and writing by Dmitry Antonov; editing by Mark Trevelyan).
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ASEAN Ministers call for an end to the Middle East War as the crisis rumbles trade and energy
ASEAN's foreign and economic ministers called on Friday for an immediate end to the Middle East war, and stated that the effects of high oil prices and disruptions in trade have already impacted Southeast Asia's economy. The Association of Southeast Asian Nations has begun implementing measures to combat the economic impact. Governments are moving quickly to conserve electricity, stabilize domestic markets, and protect sectors like tourism that are vulnerable. Ma, the Philippine Secretary of Foreign Affairs, said: "We have expressed our serious concern about the?situation? in the Middle East? and its impact on the region. We also stressed the importance?of an immediate cessation?of hostilities." Theresa Lazaro spoke at a press briefing?after an ASEAN special meeting on the crisis. She added that ASEAN had called for all parties to show the greatest self-restraint. As 'concerns about the Iran conflict intensified, the?Philippines convened a special meeting. The?ministers urged that global energy supply chains be kept open, and regional mechanisms activated to reduce the economic fallout. Crude oil has been trading at around $100 per barrel due to concerns about supply. These fears have been intensified by the promise of Iran's supreme leader that he will keep the Strait?Hormuz closed, which is the route used for a quarter of the world's oil supplies. The economic ministers from the 11 member bloc stated that the escalating conflicts have had broader economic impacts beyond the region. This is due to the 'increased volatility of global energy markets, and the disruption of important maritime and supply chain routes. Lazaro stated that the Philippines is considering purchasing oil from Russia. She did not provide any further details. The ministers of economics have warned that the region is particularly 'vulnerable' to future shocks due to its 'exposure to global oil & LNG supply routes. They added that strengthening supply chain resilience and accelerating renewable energy conversions would be crucial to maintaining economic stability.
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German Economy Minister: US waiver of Russian oil driven by domestic Pressure
German Economy Minister Katherina Riese stated on Friday that she could see both sides of the United States' decision to issue a 30-day waiver for purchases of Russian oil products. Reiche said at a press conference that he felt the domestic political pressure was very high in the United States. She stated that she is concerned with filling the war coffers of Russian President Vladimir Putin, but that the situation in South Korea, and Japan, are tense. "We have thankfully been spared these shortages," said?Reiche. She said that attacks on ships in Strait of Hormuz continue, and the International Energy Agency's decision to release oil slowly did not achieve the desired result. The IEA announced on Wednesday that all 32 members had agreed to release 400 million barrels of oil from their strategic stockpiles in order to combat the'spike' in global crude prices following the U.S. - Israel war against Iran. "The biggest uncertainty at this time is whether a shipment will make it safely through the Strait of Hormuz," said Reiche. (Reporting and writing by Holger Hansen; editing by Matthias Williams).
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Japan considers whether to purchase Russian crude oil following US sanctions waiver
An official from the?industry?ministry said that Japan would consider buying Russian crude oil after the U.S. granted a 30-day waiver of?sanctions amid the Iran War, taking into account international conditions and its own?national interest. The U.S. waiver permits countries to purchase sanctioned Russian crude oil and petroleum products that are currently stranded on the sea. Treasury Secretary Scott Bessent described this as a move to stabilize the global energy market, which has been?roiled by Iran's war. Narumi hosokawa, the deputy general-director of the Ministry of Economy, Trade and Industry's (METI) immediate crisis management, said, "We will examine the issue in the light of various international circumstances and Japan’s national interests." Another METI official stated that Russian crude oil is essential for a stable energy supply. However, Tokyo must continue to take "appropriate" measures while balancing broader international coordination and the discussions of the 'Group of Seven' with its own national interests. In 2025, Japan will import 94% of crude oil from the Middle East, and 93% of those shipments will pass through the Strait of Hormuz which is controlled by Iran. The U.S. and Israeli war against Iran has virtually blocked the flow of oil through?the Strait. Officials said that Tokyo will release 80 million barrels from its strategic reserves - equivalent to 45 days' supply - to mitigate global disruptions caused by the Middle East conflict. The government requested that domestic refiners use crude oil released from strategic reserves to ensure domestic petroleum supplies. The government's request does not limit the export of excess products generated during the refining processes. Ryosei Acazawa, Japan's industry minister, said earlier Friday that the country's refiners were seeking alternative crude oil supplies from other regions like Central Asia, South America and the U.S. (Reporting and editing by Thomas Derpinghaus; Yuka Obayashi)
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CEE ECONOMY - Romanian inflation eases more quickly than expected, but the outlook for rate cuts is clouded by war
Inflation in Romania was lower than expected for the month of February, but the uncertainty surrounding the economic impact of the conflict in the Middle East clouded the outlook on interest rate reductions. The policymakers have been unable to reduce interest rates due to a spike in inflation that has occurred after the electricity prices increased and the coalition government raised taxes in August last year in order lower the largest deficit in the European Union. Analysts were divided on whether or not the bank would cut rates until after the impact of higher taxes and electricity prices had faded. After the start of the Middle East war, analysts polled earlier this month expect the first bank cut to be in the second half. Data from the National Statistics Board shows that consumer prices increased 9.31% over the past 12 months, down from the 9.62% of the previous month, and below analyst expectations of 9,4%. Prices increased by 0.59% in the last month. The central bank raised its inflation forecast in February to 3.9%, slightly higher than originally expected. Governor Mugur Isarescu played down expectations of a rate reduction before there were clear signs that the inflation was "strongly declining". The government has decided to cap the gas prices for households until April 2027. This is a positive step for inflation. The government announced on Thursday that it would partially offset the diesel prices for transporters. Finance Minister Alexandru?Nazare also said he expects "a moderate rise?in inflation." The government aims to have a deficit of 6.2% in 2026, down from 7.7% last year and more than 9% in the previous year. Parliament is expected approve the budget before end-March. (Reporting and editing by Toby Chopra; Luiza Ilie)
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ASIA GOLD-Indian gold discounts reach near-decade-high; Mideast tensions boost China demand
The gold discounts in India reached their deepest level in nearly a decade this week as the demand remained'subdued' and some traders avoided paying import duties. Meanwhile, escalating Middle East conflict boosted demand for safe havens in China. "A few importers to India are declaring gold as platinum studded jewellery at customs, even though it contains over 90% gold. A Mumbai-based gold dealer said that they are able sell the duty-free gold at a steep discount. Imports of gold are subject to a 6% duty. However, imports of platinum-studded jewellery can be made duty-free. This week, Indian gold dealers offered a discount on the price of a gram of silver. The price of gold is now up to $83 an ounce, including 6% import duties and 3% sales taxes. This is the highest rate since July 2016. Last week they offered a discount up to $28. Jewellers are not buying as retail demand is very weak, and they are busy closing accounts for the year," said a Mumbai dealer at a private bank that imports gold. In China, the world's largest consumer of gold, prices were higher by $20 to $30 per ounce than global benchmark prices This week, the premium is significantly higher than last week's $13 to $15. "No new import quotas were issued in March so far, restricting the inflows... Bernard Sin, Regional Director of Greater China for MKS PAMP, said that the PBOC has a dual strategy - steady reserves accumulation and tight quota controls - to keep the domestic market resilient 'yet constrained. China's central banks?extended its gold buying spree to a 16th consecutive monthly. Peter Fung is the head of trading at Wing Fung Precious Metals. He said, "Physical Demand (for Gold in China) remains very high because of the conflict in Middle East. People still want to buy gold as a haven of safety." Physical gold is available in Hong Kong In Japan, the premium is $3. Gold was sold with a $1 premium. In Singapore Gold was traded with premiums ranging from $0.50 to $ 2, compared to the $2.25 premium last week.
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Europe's debt-burdened Europe is less prepared to absorb energy shocks
Energy prices are rising due to the U.S./Israeli war against Iran. This is putting pressure on European governments to provide assistance for households and businesses. However, their financial resources in some major economies have been stretched. It is unlikely that they will provide the same level of support as was provided three years ago after Russia invaded Ukraine, when subsidies and other aid amounted to hundreds of billions of euros. In response to the 2022 energy shortage that will exacerbate cost of living concerns and angered voters, governments have begun to release record amounts of oil. France, Greece, and Poland have all introduced restrictions on profit margins, and reduced prices for oil - these measures are cost-effective and beneficial to the public purse. Germany is also interested in regulating pump prices. They may still need to do more. Frank Gill, S&P Global Ratings EMEA's lead analyst, said: "If gas prices rise and there is an interruption of more than a few weeks in Qatar's gas deliveries, you can expect governments to step in and introduce some subsidies." The governments don't know yet where the energy prices are going to land. It's evident that they are cautious when it comes to fiscal measures. The British government said that it was too soon to freeze fuel duties, and the French government resisted calls from opposition parties to reduce value-added taxes (VATs) on petrol. Italy may use VAT revenues generated by higher fuel prices to fund "a reduction in fuel excise duties". Gill says that in comparison to 2022, the COVID-19 Pandemic and energy crisis have led to a budget deficit that is nearly 3 percentage points greater than that of 2019. Interest rates are higher and the economic growth is lower than it was four years ago. Meanwhile, European governments have already increased their defence spending. Germany is increasing borrowing to fund a massive stimulus program. OIL PRICES NEAR PEAKS IN 2022 - BUT NOT FOR GAS While oil prices have been flirting with $120 per barrel this week and are nearing their peak of 2022, the energy situation in Europe is different from 2022. Gas prices have risen by over 50% since the start of the war, but are still only one-sixth the level they were at in 2022. Europe hasn't replaced Russia as it did in the past. Federico Barriga Salazar, Fitch's Western European ratings head, said last week that if prices continue to rise and governments are forced to offer support, this could increase fiscal pressures on France and Britain, given their large budget deficits. S&P warned that Hungary's investment grade rating is at risk in Central Europe due to the generous support measures already in place before an April election. Barriga-Salazar says that while Spain, Portugal, and Greece are in a better financial position, higher spending could undermine their recovery. Scope Ratings has warned about Italy's fiscal reputation. While it has done a lot to repair its reputation, a slowing of the economy could make it more difficult for Italy to leave the European Union budgetary discipline measures. TARGETED MEASURES Barclays economists say that, given the limited space to act, governments will have to 'limit and target more this time, as they did in 2022. Britain and Germany are already echoing that message. Morgan Stanley estimated that the energy support measures taken by euro zone governments in 2022-2023 amounted to 3.6% of their output, even though EU rules on deficits were suspended because of the pandemic. Morgan Stanley estimates that they can only support around 0.3% of the output per year by adhering to EU rules. Morgan Stanley stated that if the Strait of Hormuz remains closed for more than a month, and there are signs of weakened growth, the EU could allow certain countries to temporarily deviate from the rules. Morgan Stanley expected these countries to spend up to 0,6% of their annual output to fund targeted actions. Morgan Stanley said that it would be a very severe economic downturn before the EU suspended its rules once again. The higher costs of debt are a constraint in themselves. Gregoire Pesques is the chief investment officer for fixed incomes at Amundi, Europe's largest asset manager. In recent years, bond investors have become more aware of fiscal slippages in Europe. Britain and France are at the front line. Pesques stated that Germany and Spain with their low debt and high growth have more room for response. The government's ability to offset the costs of support measures is key in determining the affordability of such measures. Windfall taxes on energy firms is one strategy that many European countries implemented last time, and Italy has already indicated. S&P's Gill pointed out that revenues were far below the cost of subsidies last time. Subsidies and price caps, say critics, would increase energy demand and push prices upward. Georg Zachmann is a senior fellow with the think tank Bruegel. He said: "In the short-term, it's best to enable and encourage reductions in the demand."
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MORNING BID - EUROPE - Crude shock
Ankur Banerjee gives us a look at what the future holds for European and global markets The selloff of stocks and bonds has increased as markets prepare for a war in the Middle East which could keep oil prices at $100 per barrel. Traders are scrambling to determine the risks associated with stagflation. Investors are bracing themselves for increased volatility as leaders from Iran, Israel, and the United States show their defiance. They have put on their risk-off caps and bought U.S. dollar. The global interest rate outlook has been completely transformed by the fading hopes for a quick resolution. The Federal Reserve has not cut rates this year as much as they did at the end February. On Thursday, the money markets had fully priced in a rate increase for?the European Central Bank by July, with a 70% probability of a second hike by December. In February, traders had a 40% chance of a rate reduction before the end of the year. Markets will pay close attention to a number of central bank meetings that are scheduled for next week, as they get the chance to hear from policymakers about their opinions on inflation, interest rates, and growth. The benchmark yields for the Euro Area Bunds reached their highest level since almost two and a half years, while U.S. Treasury yields on 2-years have hit a 6-month high. Since the start of the war, the U.S. Dollar has gained over 2% compared to six major rivals. Asian investors began their day with some good news. The U.S. announced a 30-day waiver allowing countries to purchase sanctioned Russian crude oil and petroleum products that are currently stranded on the sea. On the news, oil prices eased and stocks recovered some of their losses. While Treasury Secretary Scott Bessent said the move was to stabilize the global energy markets the relatively muted response underscored real inflation fears and the poor investor sentiment around the world. U.S. stock futures and European stock prices point to a higher opening, but it remains to be determined if this momentum will continue. The following are key developments that may influence the markets on Friday. * UK GDP CPI France The Eurozone Industrial and Manufacturing Data
Dollar on course for second consecutive weekly increase; Euro, yen are at multi-month-lows
The?U.S. The?U.S. dollar is on track for a second weekly gain as investors flock to safe-haven assets due to the conflict in the Middle East.
A sharp rise in oil prices that is prolonged and severe would have a devastating effect on the economies of Japan and the Eurozone, both heavily dependent on crude imports. The United States, however, would be relatively protected, as it has been a net exporter of crude for nearly a decade.
The economists are still wary about monetary tightening, as the countries' heavy dependence on energy imports will likely lead to a rise in energy prices that could impact on economic growth. The euro dropped to its weakest level since August and Japan warned it would take action if the yen fell further, as its value reached its lowest point in 20 months.
The U.S. allowed the sale of certain Russian petroleum products, which had been banned due to Moscow’s “hostilities” in Ukraine. Iran intensified its attacks on oil and transportation facilities in the Middle East after Ayatollah Khamenei, the new Supreme Leader of Iran, pledged to close the Strait of Hormuz.
The market is responding less to these?statements, which sound like an attempt to lower oil prices again. Volkmar Baur said this in reference to recent remarks from the U.S. government about a possible quick end to the conflict.
On both sides of Atlantic, markets increased bets that monetary tightening would occur on the expectation that rising oil prices will stoke inflation.
Brent futures were up on Friday as the U.S. tried to calm supply concerns. The U.S. issued a license to countries for a period of 30 days to purchase Russian oil and petroleum product stranded in the sea. The International Energy Agency agreed to release 400 million barrels of crude oil, a record amount.
Some analysts have argued, however, that the emergency measures taken to alleviate oil supply disruptions could be sending a negative message to the markets. They may indicate that world leaders do not see much room for a quick de-escalation.
The dollar index (which measures the greenback in relation to a basket of currencies) has reached its highest level since November 28. This is partly due to the safe-haven appeal but also because America is a net exporter of energy.
The index rose by 0.51%, to 100.22. It was expected to gain 1.4% this week.
EURO AT A 7-1/2-MONTH-LOW
The euro fell to its lowest level in August, $1.1438. This is a 0.62% drop. Investors are awaiting the European Central Bank's policy meeting on Thursday. Meanwhile, traders are betting that the surge in oil prices will push the central banks to raise rates this year.
Economists say that a prolonged closing of the Strait of Hormuz is needed to justify ECB monetary loosening in order to combat inflation.
Citi, however, argued that the possibility of a few "insurance" increases could not be excluded, and that the central bank may open the door next week. Citi's main argument is that the ECB should not act because of uncertainty.
The US dollar rose to 0.7894, its highest level since January.
YEN IN INTERVENTION Territory
The yen fell to 159.69 dollars, its lowest level since July 2024.
Satsuki Katayama, Japan's Finance Minister, said that Japan was ready to take action against yen movements that affect people's daily lives. She also stated that she is in constant contact with U.S. authorities regarding foreign exchange issues.
The U.S. carried out so-called rate check, which often precedes intervention. This helped drive a rally for Japan's currency. Analysts say that the recent unwillingness of officials to promote the yen could push it as low as 165 per dollar.
Chris Turner, head forex strategy at ING and a proponent of Japan's intervention, said: "The third option, a fully joint intervention with U.S. Federal Reserve, might be more lasting, as it taps into the idea that Washington is prepared to combat the recent dollar strength."
He added that "the problem for the authorities in Tokyo, Washington and London is that until energy prices are reversed, the dollar/yen won't be able to fall sustainably."
The Australian dollar fell 0.70% against the greenback, to $0.7027. (Reporting from Stefano Rebaudo, Milan; Rocky Swift, Tokyo; Editing and Lincoln Feast by Pooja Deai and Lincoln Feast)
(source: Reuters)