James Brodie
Head of Learning & Development, Flux
Markets Watch Crude, Core Gulf Producers Cut Oil Output
Oil swings wildly as war risks and Trump comments rattle markets; crude drives moves across bonds, stocks, FX and rate expectations.
Huge range in the oil price as Trump tries to stabilise markets. Every market’s watching crude.
The $35 dollar range in the oil price yesterday was the biggest one day move ever. Opening 30% higher, then falling $30 on SPR rumours and President Trumps comments (Chart 1, Brent crude future, daily chart, Bloomberg)
With oils aggressive sell-off, bonds fell 10bp, the S&P 500 rallied 3.4% from the lows, the dollar fell 1.2% from highs, now precious metals rallied, silver up 7.5% from yesterday’s lows. All moving in sync with the crude price. (Chart 2, S&P500, Bloomberg)
TRUMP SAYS “I THINK THE (IRAN) WAR IS VERY COMPLETE, PRETTY MUCH"
President Trump is considering taking over the Strait of Hormuz, per CBS.
Islamic Revolutionary Guard corps: any Arab or European country that expels the ambassadors of Israel and the United States from its territory will, starting tomorrow, have full authority and freedom to pass through the strait of Hormuz
Saudi, UAE, Iraq and Kuwait have cut oil output by as much as ~6.7mb/d.
UZ flows are down, Murban is disrupted, and while SPM is still operating, other grades are messy. Iraq was the first to reduce output and whatever remains is likely to be shut in. Kuwait has suffered some burn damage, and Saudi still has Yanbu running but also has disruptions elsewhere. Add in potential losses from Qatar and Iran and the total disruption becomes very significant.
Iranian drone damages desalination plant in Bahrain — ABC
If the war ended today with Iran's complete and total surrender, Strait of Hormuz shipping traffic would take two weeks to return to normal and Gulf oil production two months to get back to pre-war levels. And that's optimistic – WSJ
Hungary Prime Minister promises capped fuel prices for vehicles registered in his country.
A 10% increase in energy prices that persists for a year would push global inflation up by 40 basis points and slow economic growth by 0.1-0.2%, International Monetary Fund Managing Director Kristalina Georgieva said.
Just over a week ago the OIS market expected two more Bank of England interest rate cuts this year. Last week they expected no rate cuts. Yesterday, they expected rates to INCREASE. Today they expect cuts again, -11bp. An extraordinary turnaround, courtesy of the energy price shock emanating from the Gulf.
Every market is just watching the crude price.
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