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As oil crosses $91 per barrel, bond sales pressure stocks
As renewed fighting in the Middle East pushed oil prices above $90 per barrel, selling drove global bond yields to new highs. This put pressure on stock markets all over the world. The 10-year U.S. The 10-year?U.S. Treasury yield, which is used as a benchmark to set prices for all asset classes, increased 2.2 basis points, reaching a 20-month high of 4.78%. Japan's benchmark 10-year yield was close to 3%, the highest level in a generation. U.S. Futures stabilized after Wall Street Indexes recorded modest overnight drops, but the mood remained nervous as the U.S. Jobs data due on Friday could lead to an interest rate hike cycle beginning as early as this month. The rising tension between the U.S. and Iran, as well as higher oil prices, are fueling fears about inflation. This is bad for bonds. At the same time, Federal Reserve Chair Kevin Warsh reset expectations regarding the outlook. He said in a speech he gave late last week that policymakers would be forced to act if the price pressures did not ease. Wee?Khoon?Chong, APAC Macro Strategist of BNY, said that the macro mix has become more challenging in terms of duration and risk assets. "Hawkish policy, new geopolitical risks and inflation concerns, and increasing fiscal concerns are all combining to keep the upward pressure on global term premiums, as well as long-end yields." The Hang Seng and Japan's Nikkei both fell in the early trading, but the Hang Seng was a little more tepid. This was due to the disappointing debut of clothing retailer Shein Global. On Monday, German and French long-bond yields reached their highest in 15 years. Bund futures also made a 15-year low on Tuesday in Asia trading. French OAT futures were at their lowest level since their launch in 2012. Brent crude futures meanwhile, reached $91 per barrel in the morning Asian trade, while Europe's benchmark gasoline price closed Monday at a record high of more than three-and-a half years. The markets are pricing in a rate increase in New Zealand next Wednesday, and in Europe the following week. The odds of a rate hike in Japan and the U.S. this month are better than even. Geopolitics is a tense backdrop. After the first firefight in a whole month, U.S. president Donald Trump threatened to strike Iran again. Meanwhile, increased fighting between Russia and Ukraine is pushing wheat prices close to a three-year-high. The U.S. Dollar has only received limited support from the global rise in borrowing costs. The dollar remained at $1.1619, while the euro stayed at $1.1619. The yen was at 159.76 per dollar. In Europe, preliminary?inflation numbers are expected later on Tuesday. Hong Kong Shein shares fell in early trade just below the offer price that was already reduced from previous fundraising rounds. Tariff and duty changes have hit the fast-fashion retailer known for its $5 tops, and $10 dresses in Europe and the U.S., eroding a key component of its low-cost model.
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Officials say that US oil company will take over Venezuelan oilfields that were previously operated by Chinese and Russian firms
Two U.S. officials said on Monday that the U.S. company North American Blue Energy Partners would take over oilfields controlled by several Chinese firms and a Russian firm. They said that the 'takeover' will be part of an oil production agreement President Donald Trump has announced with Venezuela. According to officials, the projects were part of 14 new contracts awarded to U.S.-backed North American Blue Energy Partners. NABEP, owned by U.S. oil magnate Harry Sargeant, is now controlled and managed by Venezuelan Alejandro Betancourt. Last week, Trump said that the U.S. has secured access to 64 billion barrels (or a quarter of Venezuela's proven reserves) through a partnership with private businesses. This arrangement allows U.S. firms to gain a foothold on some of Venezuela's strategic oil assets, while dislodging Chinese and Russian interests that have played a significant role in the energy sector for many years. Washington will also have a say in who sells and produces Venezuelan oil. The Trump administration is trying to reshape Venezuela's energy industry to better serve U.S. geopolitical and economic interests. NABEP will control 17 projects in Venezuela, which it intends to develop. The officials stated that five of the fourteen fields were operated by Chinese firms under a model promoted at the time by Nicolas Maduro. One field was operated previously by a Russian firm. China Concord Resources operated two of the projects, and was sanctioned in 2019 by the U.S. for Iran-related activities. The officials stated that Sinopec operated another project and China National Petroleum Corp. was responsible for a third. The official stated that "not only do we open up new opportunities for U.S. Government and operators, but we also open up the United States market as a place to sell this oil that was previously sent to China." Officials said that two other projects were run by affiliates who are affiliated with?Alex Saab?, an ex-close associate of Nicolas Maduro, the ousted Venezuelan president, currently held in U.S. custody. Officials said that another oilfield had been?linked' to the nephew of Maduro’s wife Cilia Flores. Trump said to reporters on Monday morning that the U.S. is taking "millions and thousands of barrels" of oil that are currently being shipped to refineries, including those in Texas and Louisiana. On Tuesday, he will meet with oil and gas retailers and refineries. Officials said that talks between Venezuelan interim authorities and members of the 2015 National Assembly were aimed at restoring constitutional order and addressing legal questions surrounding the transition of the country. The Trump administration views the 2015 assembly, which was elected and operates under Venezuela's constitution but has no formal ruling power, as the last Venezuelan legislature. An official stated that an agreement reached with the 2015 assembly would provide a legal and constitutional basis for a broader transition. This could include economic decisions, such as the revival the Venezuelan oil industry.
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Park Service: 20 or more people may be missing after flooding in Grand Canyon
The National Park Service reported that at least two people were killed, and up to 20 or more others are still unaccounted for, after flash floods struck the 'Grand Canyon' in Arizona on the weekend. This forced the helicopter evacuation of dozens hikers. The heavy rains of Saturday swept trails, footbridges, and other infrastructure away as a cascade mud, rocks, and debris washed through Bright Angel Creek. Bright Angel Creek is a major canyon that runs between the North Rim and the Colorado River. The National Park Service announced on Monday that two bodies had been recovered. One of the victims was a 46-year old man, whose remains had been found Sunday. Search-and-recovery efforts continued along the canyon's floor. Uncertain was the exact number of people still missing two days after the area around Bright Angel Creek in the canyon became a torrential flood due to heavy rains. The Park Service stated in a post on social media that it was looking for "information" about at least 20 people who were missing or not accounted for following the flood of Saturday. According to the Park Service, as of Sunday morning, 62 people had been evacuated. This included a historic lodge and campground located near the confluence between Bright Angel Creek, the Colorado River, and North Kaibab Trail which follows the creek into the canyon. The Park Service reported that "the flooding caused extensive damages to the infrastructure in the inner Canyon, including the Transcanyon Waterline which supplies water for use in park from the canyon." The agency reported that the temporary shutdown of the system left the park with limited water resources, which required significant conservation measures to maintain park facilities. The South Rim of the Park was open for the public on Monday during the day, but the overnight accommodations and concessions were closed. Additional thunderstorms are expected to arrive early next week. The Park Service has asked visitors to stay away from flood-affected areas for now. David Gregory, a visitor to the park, told CBS News he and guests from the Phantom Ranch 'lodging complex' fled over a footbridge towards higher ground at the prompting of a ranger. This was just 10 minutes prior to the span being washed away. He said, "It was a whirlpool inside, with debris, cabins, and other equipment from maintenance work sites circling around." "I don’t think we’d have made it out alive... I think the game would have been over." U.S. Representative David Schweikert of Arizona, a Republican, was among the Grand Canyon National Park guests caught up in this flood. He and his friends were rafting through the canyon, near Bright 'Angel Creek, when they heard a roar approaching. Schweikert told the Arizona Republic that it sounded "like a few locomotives crashing through and smashing rocks". He said that his group was able to make it to safety by hiking. The Grand Canyon is one of the most popular national parks in the United States, attracting 4.4 million tourists last year.
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Oil prices and yields are up; US and Iran resume their military attacks
The yields on bonds rose, and the stock market fell Monday due to a jump in oil prices of more than 2%. This was accompanied by a return of military conflicts between the U.S. Worries about inflation are exacerbated by the resumption of military clashes between the?U.S. U.S. President Donald Trump promised to "hit them hard" on Monday after Iran launched missiles at two U.S. bases in Jordan overnight in response to an attack by the U.S. on Iran's Larak island. Brent crude futures rose by $2.39 or 2.71% to settle at $90.59 a barrel. U.S. West Texas Intermediate Crude climbed $2.36 or 2.83% to settle at $8576. Brent reached its highest level since August 25 during the session. This kept the possibility of future interest rate hikes by major central banks alive. Federal Reserve Chairman Kevin Warsh’s speech in Jackson Hole, Wyoming on Friday increased bets that the Fed will raise interest rates by September. Fed funds futures traders now price in 65% odds for a rate hike in September, up from 35% prior to Warsh's Friday comments. It is widely expected that the European Central Bank will raise rates at its meeting on September 9-10. U.S. Treasury rates rose, and the dollar edged down as expectations increased of a Fed rate hike in September. Wall Street saw the Dow Jones Industrial Average?fall 374.09 points or 0.70% to 53,185.90. The S&P 500 dropped 25.62 points or 0.33% to 7,686.14 while the Nasdaq Composite fell by 31.53 points or 0.12% to 26,370.89. Peter Cardillo is the chief market economist of Spartan Capital Securities, a New York-based brokerage. He also said that the market was about to enter "a month which is usually quite difficult for stocks." The stock market has historically had a poor performance in September. Trading volumes were low as London's markets were closed on a holiday. The pan-European STOXX 600 fell 0.6% to 651.1 points. The MSCI index of global stocks fell by 3.94 points or 0.34% to 1,149.22. Major indexes have posted gains in August despite the losses on the day. The Nasdaq rose 3.9% in August, as the AI trade continued to thrive despite recent weakness. The Dow Jones industrial average has now risen for five consecutive months. The MSCI Global Index is up 2.6% in August. There are dark clouds out there. Adam Sarhan is the chief executive officer of 50 Park Investments, a New York-based investment firm. He said that inflation and rate increases are two of the biggest risks. However, the market is holding up so far. The Fed's decision to move as soon as next month will depend on the U.S. August payroll report due Friday and the consumer price data that is due September 11. After July's shocking decline of 23,000 workers, economists expect payrolls will increase by 58,000. Unemployment is expected to remain at 4.1%. The yield of the benchmark 10-year Treasury bill in the United States was up 3.6 basis point at 4.758%. It had earlier reached 4.768%. This is its highest level since January 15, 2020. The yield has increased by 1.5 basis points for the month. Prior to this, the yields on French and German 2-year bonds also rose. The dollar index (which measures the U.S. currency versus six major counterparts) was down 0.24% to 99.43, after reaching 99.73 on Thursday, its highest since August 17. The index is on course for a second monthly decline following the U.S. Treasury Bond-buyback Plans earlier in the month that revived debasement trading. The yen rose on Monday, after Treasury Secretary Scott Bessent stated that he believed Japan's central bank and government would take actions to strengthen the yen. This suggests a high probability of an interest rate increase by the Bank of Japan in September. After slipping past 160 dollars on Friday, the yen gained 0.2% and is now at 159.77. Spot gold dropped 0.1% to $4.448.30 per ounce.
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US judge rules that New York can't enforce its $75 billion climate "superfund" law
A federal judge ruled Monday that New York could not enforce a state law from 2024 which aimed to force fossil-fuel companies to pay $75 billion in 25 years to a fund for damages caused by climate changes. Chief U.S. district judge Brenda Sannes, of Syracuse, New York, sided with 22 Republican state attorneys general as well as business groups, including the U.S. Chamber of Commerce in determining that the state measure was preempted under?federal laws. The New York Democratic Governor Kathy Hochul's office did not respond immediately to a comment request. Sannes, a Democratic appointee to?President Barack Obama's cabinet, stated that the Clean Air Act did not allow states to adopt emission compensation schemes like New York's. She said that enforcing New York’s Climate Change Superfund Act would risk?upsetting balance between preventing climate change, "a project which requires national standards and international participation," and promoting economic growth and energy production as well as foreign policy and 'national security. She wrote: "The Climate Act is in conflict with the need for a uniform decision-making process on issues affecting?national energy policy and environmental policy and basic interests of federalism." In a press release, West Virginia Attorney-General JB McCuskey (a Republican) who led the opposition to the law praised the decision and called the New York elites "money grabs."
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Trump claims Exxon will 'go in' to Venezuela, as the US pushes for oil deals
U.S. president Donald Trump stated Monday that ExxonMobil was part of a group of companies who planned to do business with Venezuela. Exxon declined to comment. Exxon declined to comment. The oil company operates the Stabroek block in neighboring Guyana which produces over 900,000 barrels a day. Trump stated at a press conference?inside the Oval Office that "millions of barrels" of oil are being exported to refineries across the country, including Texas and Louisiana. "We are making a fortune and they are making a Fortune." "They're beginning to make real money," Trump said, referring the American efforts to restart oil production after U.S. troops captured and removed former president Nicolas Maduro in January. Darren Woods, Exxon's CEO, drew Trump’s ire when he said Venezuela was "uninvestable" at a White House Meeting in January. He also stated that more durable protections for investment were needed. In March, the company announced that it would'send a technical team to study opportunities in Venezuela. Venezuelan and American officials are expected to seal a deal this week that would give the U.S. a chance to access a fifth Venezuela's oil reserves. Separately firms such as Chevron and GE Vernova are expected to announce new or expanded agreements in the country.
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Trump on Venezuela leaving OPEC, if it happens: 'It is up to them.'
?U.S. Donald Trump stated on 'Monday' that Venezuela is responsible for deciding whether or not it wants to leave the Organization of Petroleum Exporting countries (OPEC), which it has belonged to for over 60 years. "Well, I'm not sure." It's their decision. That's up to them. Washington has maintained strict 'oversight' of Venezuelan oil industry ever since U.S. troops?captured the then President Nicolás Maduro, in January. Both countries signed an oil supply agreement involving major trading houses shortly after. This allowed Venezuela to increase its crude exports to America. Trump announced on Friday a 'larger deal' for the U.S. that would lock in 17 oilfields located in Venezuela. These fields contain 64 billion barrels worth of proven crude reserves, which is a fifth the total of Venezuela. This could provide up to 1.5 million barrels a day to the U.S. Trump stated on Monday that Exxon Mobil, a major U.S. oil company, and Chevron are among the companies "committed" to investing in the country. He did not elaborate.
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Park service reports two deaths in Grand Canyon following flash flood
The National Park Service reported that one body was recovered after flash flooding occurred in Grand Canyon National Park on the weekend, and that recovery operations for a second were under way Monday. According to the National Park Service, heavy?rainfall on Saturday caused the canyon to flood, damaging trails and footbridges. It also damaged infrastructure that transports water throughout the park. 62 hikers were forced to be evacuated via helicopter by Sunday morning. Park officials reported that a body of 46-year old?man was?found? on Sunday. The NPS posted on X that "more than twenty individuals" may be missing or unaccounted and asked the public for information about hikers in the path of raging 'waters. The NPS did not provide any additional details on the second victim or an updated count of those missing in response to the questions asked by the media on Monday. The South Rim of the park was open for the day Monday, but the overnight accommodations and concessions were closed. Additional thunderstorms are expected to arrive early in the week. On Monday, several hiking and lodging areas affected by floods were still?completely closed. The NPS has asked visitors to stay away from closed areas as search and recovery operations continue.
Can the Middle East help with Asia's low refined fuel imports? Russell
The Iranian conflict has continued to affect the supply of refined petroleum products in Asia. In August, the region that consumes the most refined fuels saw its imports drop to their lowest level since the start of the war.
Asia's imports of light and medium distillates were estimated at 5,10 million barrels a day (bpd), down from 5,61 million bpd during July, according to Kpler data, a commodities analyst.
Imports are down by about 2 million bpd, compared to the 7.06 million bpd average in the three months prior to February 28, when Israel and the U.S. launched airstrikes against Iran.
The market has focused on crude oil supply since the beginning of the conflict, due to the dramatic drop in the shipments that passed through the Strait of Hormuz. This narrow waterway was the route through which 20% of global oil shipments had been moving before the hostilities.
The number of tankers moving through the strait remained limited, but there was debate over how much oil made it through. While the U.S. Energy secretary claimed that up to 9,000,000 bpd were being transported, several vessel tracking?services claim less than half.
The oil market shouldn't be focused on the debate about crude volume leaving the Middle East, at least in the short term.
Asia, the destination of about 90% Middle East crude oil, has adapted to lower supplies. The top buyer China, for example, cut its imports by almost 4 million bpd, and has also reduced inventories.
The real pressure on the market is felt by refined products like jet fuel and diesel, especially middle distillates.
The market has to cope with the loss in cargoes coming from the Middle East, as well as from Russia which has cut back on fuel shipments following the successful attack by Ukraine against several of its refineries.
Singapore gasoil ended at $155.15 per barrel on Monday. This is up?70% compared to $91.42 on February 27th, the day before the Iran War began.
On Monday, the profit margin of a typical Singapore refinery producing a barrel gasoil was $67.93. This is three times higher than the $21.90 on February 27.
Gasoline has a similar dynamic. The profit is the same.
PRODUCT FLOWS
The large margins of light and middle distillates raises some questions regarding the dynamics of the market.
Why do Gulf producers risk their lives by shipping crude oil through the Strait of Hormuz as well as the Bab el Mandeb waterway, when they can make "vastly more" money moving refined products instead?
Kpler estimates that exports of middle and light distillates from the Middle East were 2.14 million barrels per day in August. This is down from 2.58 millions in July.
The average daily production of 4.49 million bpd for the last three months is also 55% lower.
Asia's imports are down about 2 million bpd as a result of the Middle East losing its supply.
In the initial phases of Iran's war, Tehran attacked refineries across the Gulf. However, most of the damage was repaired. Some capacity is still offline.
Saudi Arabia and the United Arab Emirates are likely to have the refinery capacity needed to produce the fuels required in Asia.
It may be a lack of vessels available to transport the products, and a difficulty of transferring fuel from one ship to another. This is assuming that you are able get the fuel through the Strait of Hormuz with no Iranian missiles or drones attacking.
The Iran conflict has shown that the oil markets are remarkably good at adapting to difficult circumstances.
High prices and a constrained supply of refined products could cause serious economic damage if Middle East producers do not switch to exporting more fuels.
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These are the views of the columnist, an author for.
(source: Reuters)