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US diesel futures drop after White House denies export ban report
US ultra-low sulfur?diesel?futures fell 4% on?Wednesday?after Politico reported the White House was preparing a 90-day ban on diesel exports, which Trump Administration denied. According to AAA, the average US diesel price is nearing record levels at $6.52 per gallon. This puts pressure on farming, transportation, and other industries that depend on this fuel. The wars in Iran and Ukraine has led to a sharp drop in exports by some of the largest?producers, such as Russia and Saudi Arabia. White House officials said that a report that the US is considering a temporary flat export ban wasn't correct. The October futures contract traded at $4.7437 per gallon last, down 4% after falling more than 6% earlier. Trump announced on Tuesday that he supports a ban of diesel exports. Republican candidates running in some of the most tight races in November had called for this measure to help curb fuel prices. Diesel's surge' has coincided with a drop in US?diesel stocks to less than 95 million barrels or 13% below the seasonal average of the last five year. US Energy Secretary Chris Wright stated on Wednesday, however, that a ban on US diesel exports will not work and may increase gasoline and jet fuel costs. Wright stated that the administration is working with the refinery industry to increase supply of US diesel in "a simpler, voluntary and cooperative manner, without using blunt tools that would reduce the refining process." He said that any plan will be voluntary. He didn't elaborate on the plan and said that no decisions had been taken. A ban on exports of diesel would increase prices for?diesel worldwide. After Trump's remarks, the European diesel?refining industry saw its margins reach a new record on Wednesday. Analysts have warned that it could also hurt the margins of US refineries and push prices down in the United States. If a ban were to be imposed, refineries would most likely reduce the amount of crude that they process. Analyst and traders say that if US refineries reduce runs, this would lead to a reduction in the supply of gasoline, and other products. This could potentially push up prices for these fuels. U.S. Interior Secretary Doug Burgum stated earlier this month that a ban on oil, diesel or gasoline exports may lead to retaliatory measures from other countries. This could harm consumers in California, whose energy imports are partially dependent on.
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Analysts say that the US ban on diesel exports would harm global fuel markets
Analysts said that a US diesel export ban would be a self-defeating measure. It would not only do little to ease high US fuel costs, but it could also worsen economic disruptions and supply problems around the world. Donald Trump, the US president, reportedly said on Tuesday that he supported a ban. According to AAA, the average US diesel price has risen to a record $6.51 per gallon. Diesel is essential to the global economic system because it powers the transportation equipment, farm machinery and machinery that makes and moves goods. Fuel prices are high, and they increase the cost of transporting everything from consumer goods and groceries to industrial materials. This is already a major problem for Trump and Republicans as we head into the midterm elections in November. Why are diesel prices high? The price of diesel has risen around the globe due to a combination of factors, including supply disruptions caused by the Ukrainian strike on Russia's refining facilities, damage inflicted on Middle East refineries as a result the US-Iran conflict, and low inventory. In July, Russia, the second largest exporter in the world, banned diesel imports until at least September. The US-Iran War has also affected or stopped diesel exports through the Strait of Hormuz, and in the Red Sea. In August, the US exported a record number of barrels per day (bpd) of diesel. This is up from 1 million bpd before the Iran War began in February. According to Kpler, the top buyers are Brazil, Chile Mexico, Peru, Morocco France and United Kingdom. Will US Fuel Prices Rise or Fall After 'THE Ban? A ban on crude oil would probably cause US refineries reduce the amount they process. Analyst and traders have said that if US refineries reduce runs, they will also lower the amount of gasoline produced and increase prices. Capital Economics wrote in a report that an oil ban could be counterproductive because a diesel surplus in the US would force refiners in America to reduce their supply of oil products. This could happen within weeks. The American Petroleum Institute (API), a major trade association, warned that restricting US diesel exports could have a devastating impact on fuel markets both in the US as well as abroad. It would also destabilize refinery operation and worsen a global crisis of refining. Energy economist Philip Verleger said that a ban on the use of ethanol could increase world prices up to 100%. WHAT WOULD A ban affect?EUROPE and ASIA? The European diesel price has reached record levels and the Asian prices are not far behind. The European Union would be a net importer of diesel, and have limited options to meet the demand, given the Russian ban. Europe's dependence on US diesel will increase in 2026 as Middle Eastern exports to Saudi Arabia and United Arab Emirates decline. Consultants FGE NexantECA predicted that global prices would rise further because buyers in Latin America and Europe would have to compete with each other for a limited pool of supplies. Citi analysts warned that even a partial ban in the US could cause product shortages across Europe, South America and Australia, as well as Africa. The market was not cooled by higher?Chinese Diesel exports in July or August, according to the report. Asia, which is home to some of world's largest?refinerys complexes, produces typically more diesel than they need. India, as the region's main supplier, may be the first to increase exports to Europe. WHAT ARE THE IMPLICATIONS POLITICALLY AND GEOPOLISTICALLY? Some Republican Senate candidates who are in the most competitive races for the November 3 elections have called on the administration to implement an export ban to reduce the high cost of goods for Americans. Jim Mitchell, Director of Oil Trading Analytics at Wood Mackenzie, said that the report was more of a political sounding than a real reality. Mitchell also said that the move would harm some of America's key allies in Europe. Verleger said that the world would no long view the United States of America as a reliable energy source.
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De Laurentiis wished to "shoot" Infantino then applauded the World Cup show
Aurelio De Laurentiis, Napoli's President, has a talent for turning football politics into cinema. FIFA President Gianni Infantino was cast as both villain and hero in his latest monologue about the state of football. De Laurentiis, speaking after receiving the lifetime achievement award of Italy's Foreign Press Association, did not directly attack Infantino. The Italian has been called to resign following an investigation into a plan in which private investors could have purchased shares for the World Cup or other competitions. The Napoli owner instead offered a "barbed" assessment of FIFA's rise to prominence and its global reach before admitting that he was impressed with the staging of the 'World Cup' this year. De Laurentiis, speaking at the Rome ceremony, said: "Infantino does his work from his own point of view." What are we to say about a former secretary who, after becoming president, is allowed to travel the world with the FIFA badge and meet Trump, Putin, and everyone else? We must say that he is just doing his job. "I wanted to shoot Infantino, but after seeing how he organised things, I decided to hold my hand up and say, 'Well done'." EUROPE FOOTBALL POWER STRUCTURES De Laurentiis' Napoli, which he rescued from bankruptcy over two decades ago, has won two Serie A championships and five domestic cups. He was less kind about?European soccer's power structure. He said: "Sport in Europe is in crisis, not in the United States. The shining beacon is still there. What is the purpose of the Europa League? What is the Conference League? The Conference League is a way to collect votes to re-elect those in 'all those organisations that are above any legislative oversight because they do what they want, and if you even raise your head, they will immediately cut it off. "Look what's happening at FIFA and what has happened at UEFA over the years. A series of videos from a few year ago tells the tale of FIFA's troubles ..." De Laurentiis reiterated his desire that Napoli have a "family-friendly" stadium, and said that hard-core Ultras had "no place" in this vision. "I'm against ultras. Football must be about passion and education for children." De Laurentiis pointed out that you can't have 'ultras,' or hooligans, who are modeled after the Mafia. It's a serious problem until our police chiefs, and ministers of the government, get it under control.
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Investors start to worry about 6% Treasury yields as 5% Treasury yields begin to lose their shock value.
Years ago, 5% of the benchmark US 10-year Treasury?yield had been regarded as the point where global financial markets began to experience turbulence. This threshold is becoming less of a ceiling, and more like a waypoint. This month's breaching of 5%, something that has only happened briefly in recent decades, has forced investors into a?unsettling thought:?What happens if 6% becomes the number that keeps them up at night? This theory hasn't been tested enough by the latest move above 5%. Mike Bell, BlueBay Asset Management’s head of Market Strategy, says that it was always a psychological indicator and not a tripwire. Bell explained that people think there is a magic number at which Treasury yields become a problem. "But it's not an absolute number but a relative one," Bell said. It is important to compare Treasury yields with other investment metrics. This includes the earnings yield of stocks. Bell claims that the relationship is approaching an inflection, which could set up a selloff of stocks. The past offers some guidance. MSCI's world stock index lost half its value when the 10-year Treasury yield crossed 5%. This was right before the global financial crisis. It suffered a similar decline less than a decennium earlier, when a 6.8% increase helped burst the dotcom boom. Analysts at JP Morgan say that a "key shift" in the global economy is one reason why the pain point could be back above 5%. AI, healthcare, and services are playing a larger role. These firms continue to spend and expand, regardless of how high borrowing costs are. JP Morgan stated that the traditional interest rate channel "looks materially less bound" and the "breaking-threshold" of the stock markets could be "significantly higher, possibly?in a range of 5.5%-6.0%", referring to the views expressed by some of its major investors during one of their most recent conferences. REPRICING - a firm price A shift from 5% up to 6% in the $29 trillion Treasury market would be a 'profound adjustment of the global capital cost. A Treasury yield of 6% would indicate either significant higher inflation expectations, growing concern about US fiscal sustainability or a conviction that rates will remain high for years. Austan Goolsbee, a Federal Reserve policymaker, said that he did not know if markets would react differently if 5% yields were extended for a longer period than in the past. Invesco's global head of asset-allocation research, Paul Jackson, explained that investors are focused on Treasury yields because they represent the risk-free benchmark for the world. At above 5%, investors have the opportunity to lock in their highest returns since 2007. Jackson's calculations show that world stocks begin to fall when the 10-year bond yield has traded at 4.72% on average for 12 months, and then increases. The tipping point is still a long way off - the average 12-month yield is around 4.34%. But Jackson has already started to reduce his stock holdings and put some of his money in government bonds, hoping to take advantage of the high yields. He said that if Treasury yields continue to rise, the risk is that in a year's time the stock market will be lower. Emerging Questions When US yields rise, emerging markets that have been on a "hot streak" in recent years are usually "among the first victims". Dollar-denominated investments become more appealing when Treasury returns are higher. This drains capital from EM economies, and can push hard-up nations into crisis if their dollar-denominated loans spiral out of control. Last week, data on investment?flows showed the largest exodus of EM bond funds for months. Billions were also withdrawn from equity fund. The issuance of emerging-market sovereign bonds has also been notably lighter this month. Alison Shimada is the Head of Total Emerging Markets Equity at Allspring Global Investments. She said that while the picture was not ideal, it was still "constructive" because for now, nothing "horribly went wrong". The biggest psychological risk is the most likely. Investors will begin to question whether 6% can be achieved, and the discussion will move beyond a temporary increase in yields. The debate shifts to the possibility that?the era of abundant liquidity and ultra cheap money is over, forcing global asset values to adjust to a permanent higher cost capital. Premier Miton CIO Neil Birrell stated that while the stock market is not showing signs of collapse right now, this could be because investors haven't yet plugged in 5% plus yields to their long-term profit forecasting model. Birrell stated that "the markets appear fine until everyone runs their valuation models again." "The numbers will come out in the end."
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Microsoft invests $10 billion plus in the Gulf with a focus on resilience
Microsoft plans to invest over $10 billion in the United Arab Emirates, Saudi Arabia and Qatar between now and 2030. This will include cloud and AI infrastructure. As the Iran War continues, the US tech giant is making digital resilience an important part of its strategy in the region. Brad Smith, Vice-Chair and President of Microsoft, said that the investment was a reflection of both the "ongoing construction of infrastructure" and the "expansion of operations in the area". Gulf countries are investing billions in AI to diversify away from oil and natural gas. They believe that the abundance of land?and cheap energy will attract hyperscalers like Microsoft. The war and its uncertainty, as well as the attacks on data centres like Amazon's AWS facilities in Bahrain and the UAE, pose challenges. "We are sustaining the investments that we had planned to make before this conflict began, and in fact?we are adding to them. Smith said that the spending plan was aggressive. Microsoft, he said, had provided support to local partners, including digital resilience assessments even during the first week of conflict that began on 28 February. DIGITAL RESILIENCE Microsoft has now begun to assist the Gulf States in areas like readiness and data protection, as part of an initiative for digital resilience. Smith stated that it was not possible to provide a breakdown by country or project of the planned investments. Smith cited factors such as security. The UAE has been largely spared attacks since May. However, other Gulf countries continue to be threatened. Microsoft plans to invest $400 million by 2030 in the Middle East for subsea and terrestrial connectivity. Microsoft is also strengthening its partnership with national AI firms, such as Abu Dhabi's G42. Microsoft has invested $1.5 billion in the company for a minor stake, which will be?transferred to Microsoft by 2024. This will give Microsoft a seat on the board currently held by Smith. Microsoft works with Saudi Arabia’s Humain and Qatar’s Qai “in selected areas which are priorities for them,” he said. He noted that Microsoft does not plan to invest capital in these firms.
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Meloni's nuclear energy plan is backed by the Italian parliament
The upper house of the Italian Senate gave final approval on Wednesday to a government plan for restarting nuclear power generation, nearly 40 years after an Italian referendum forced its reactors to be shut down. The government wants to deploy advanced modular nuclear reactors in order to decarbonise the industry and improve energy security. It argues that technological and safety advancements have rendered obsolete the 1987 anti-nuclear referendum. The 'right-wing' administration of Prime Minister Giorgia Melloi is trying to protect the economy from the surge in energy costs triggered by the?conflicts in the Middle East. This has rekindled calls to reduce the country's dependence on foreign oil supplies. After the vote, Energy Minister Gilberto?Pichetto?Fratin said: "Sustainable?power will, along with renewable energy sources make Italy a secure, independent, and competitive country." Italy is heavily reliant on energy imports. This includes electricity produced by nuclear plants in neighboring countries, such as France. However, anti-nuclear activists argue that the safety concerns and time required to build new reactors are greater than any potential benefits. Italians are divided over the issue. Demopolis' June poll found that while 51% of respondents supported restarting nuclear energy generation, a majority were opposed to the construction?of a plant near their home. The government's plan, which was unveiled last year and estimated that nuclear power could account for at least 11% (EUR17 billion) of Italy's energy mix by 2050. According to the national plan for energy and climate in Italy, this share could rise up to 22%. The law gives 12 months for the government to implement the necessary?decrees to restart nuclear power production. The law also lays out provisions for the decommissioning of old facilities and setting up an independent regulator. The opposition parties of the centre-left were largely against this measure, and they urged that the government allocate no additional land for new reactors. "New plants should be located in areas which are already developed or degraded, or that have been affected by former industrial activities without taking up additional land," said Five Star Movement Senator Elena Sironi.
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The FOREX Dollar jumps near a two-month high due to Fed outlook and oil rise
On Wednesday, the US dollar reached its highest level since nearly two months as 'investors' priced in an upcoming rate-hike cycle from the Federal Reserve. Meanwhile, oil prices rose as a result of comments made by 'Iran regarding progress in peace negotiations. Following the rate hike by the Federal Reserve last week, several Federal Reserve officials also hinted at the possibility of further rate increases in the event that inflation continues to rise. Federal Reserve Governor Michael Barr stated on Wednesday that the US central banks took an important step to "recalibrate", short-term borrowing rates to bring down inflation. He also said they will need to continue to raise interest rates. Elias Haddad is the global head of markets strategy at Brown Brothers Harriman, based in London. The dollar is being pushed higher by the Fed's hawkish hike last week. There hasn't really been any data or data that is policy-relevant this week, but the comments made by Fed officials are interesting. They're all basically saying the same thing, i.e., more tightening will be coming. Dollar gains continued after S&P Global reported that its flash US Composite PMI Output Index (which tracks manufacturing and service sectors) increased to 58.4 in September, its highest reading since July 2021. This was due to a surge of new orders. However, strong?demand stretched supply chains and drove prices higher. The dollar index, which measures greenbacks against a basket currencies, rose by 0.54%, to 101.09, after reaching 101.1. This was its highest level since July 29. LSEG data shows that after the release, the expectation of the Fed to raise rates by at least 25% basis points during its October meeting jumped to 75%, up from 53%. The greenback's gains were also fueled by the rise in oil prices after Mohsenrezaei said, in an interview on state TV, that the Strait of Hormuz will not be reopened until Iran's demands are met. Oil prices have been falling since mid-September when they reached a four-month peak. But this week, the price has reversed its course. The euro is down 0.52% to $1.1386, and it's on track for its third consecutive daily decline. S&P Global Flash Euro Zone composite PMI Output index data revealed that the region's economic health is surprising, despite the fact that conflicts in the Middle East or Ukraine are driving up energy prices for firms and households. Investors also await a high-stakes summit between Trump and Chinese president Xi Jinping, as both leaders seek to stabilize their relationship amid the tensions that are brewing between the superpowers over trade and technology. The dollar rose 0.20%, to 6.712, versus the offshore Chinese Yuan. The Japanese yen fell 0.6% to 158.32 dollars per dollar, as traders remain wary of the possibility of intervention following the Bank of Japan’s rate hike last week to a record high. However, the Bank of Japan’s announcement of an increase to the highest level in 31 years did not reassure investors that there would be more. Analysts say that the Japanese markets are closed due to a holiday. This period of reduced liquidity increases the likelihood that authorities will intervene.
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Iran's President says Tehran won't surrender to the US in a war, but believes that diplomacy is better than war
Masoud Pezeshkian, the Iranian president, told the annual gathering at the United Nations of world leaders on Wednesday that Iran would not surrender to the United States in the war, but that he believes in diplomacy as a way to resolve the conflict. The United States delegation left the room at the beginning of Pezeshkian’s speech. The US'mission at the United Nations didn't immediately respond to an?invitation for comment. The Strait of Hormuz has become the focal point of tensions between Iran, and the US. It was a conduit for a quarter of 'global oil, and liquefied gas, before 'the war. "It is not possible that the Strait of Hormuz benefits everyone while we are denied shipping access through this waterway. Pezeshkian stated that the permanent deployment of hostile forces and the expansion in the war would not lead to peace. Pezeshkian spoke to the 193 members of the?General Assembly?a day after US president Donald Trump spoke. Trump made the case 'for his war against Iran in his speech on Tuesday, saying that he had prevented Tehran from obtaining nuclear weapons and warned that he could 'annihilate the Islamic Republic' if a deal was not reached to end this conflict.
India reduces edible oil import duties to lower prices before festivals
India's government announced in a late-Wednesday notification that it had cut the basic import duty for crude and refined edible oil including palm oil, soybean oil and sunflower oil. The move was made to reduce prices during the busy festive season.
The price of vegetable oil in India has risen by nearly 20% in the last year. The duty reduction is expected to reduce prices and increase consumption at major religious festivals between September and November, with sweets, snacks and fried food.
According to traders, the increased demand from India would help support Malaysian palm and US soyoil benchmark futures.
The notification stated that the basic import duty for crude palm oil, crude soyoil, and refined palm oil has been reduced from 10% to 5%.
It said that the import duty for?crude' sunflower oil was reduced from 10% to zero, and that the duty on refined sunflower oils had been reduced from 32.5% to 22.5%.
In addition to the basic customs duty on edible oils imported into India, there is also the Agriculture Infrastructure and Development Cess and Social Welfare surcharge.
Crude palm and crude soyoil import duties will be reduced to 11% from 16.5%. Crude sunflower oil import duties will also be cut from 16.5% to 5.5%.
Last week, it was reported that India was planning to reduce import duties on edible oil to give relief to consumers over the festive season.
Sandeep Bajoria of Sunvin Group in Mumbai, the chief executive officer of a vegetable oil brokerage, said that refiners held off on purchases because they hoped to see a reduction in import duties. However, now, they plan to import more products due to the festival season demand.
India imports palm oil, sunflower oil and soya oil mainly from Malaysia, Indonesia and Argentina.
Aashish Acharya said that Sunflower Oil will be the most benefited by the duty cut. This will make it more appealing to refiners, and could take some demand from palm and soyoil.
(source: Reuters)