BlackMask Breaking News

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The United States and Iran are close to reaching a temporary agreement on nuclear enrichment and oil exports, Middle East Eye reported Thursday, citing two sources with direct knowledge of the talks. According to sources, Tehran has agreed to halt its uranium enrichment activities at 60% and above and will continue to cooperate with the International Atomic Energy Agency (IAEA) for monitoring and verification of its nuclear program. Moreover, the deal allows Iran to export up to a million barrels of oil daily and access its frozen funds abroad. One of the facilitators of the deal is Qatar offering its assistance in resolving banking-related issues. Though the results seem promising, yet there is reluctance from both sides

China’s Monthly Crude Oil Imports Surge To Third-Highest On Record

As Chinese refiners returned from maintenance and built stockpiles, China’s crude oil imports jumped in May to the third-highest level on record, according to official data. China’s crude oil imports averaged 12.11 million barrels per day (bpd) in May, per data from the General Administration of Customs cited by Reuters. The imports in May surged by 17.4% compared to April when China imported just 10.32 million bpd of crude oil. The May crude arrivals were also 12.2% higher than in May of 2022 when imports averaged 10.79 million bpd. The building of crude inventories has supported crude oil imports and demand despite the mixed macroeconomic data coming out of China in recent weeks. “Demand slowdown from China has been a major concern for the crude oil market recently, and a recovery in oil imports is likely to provide some comfort to the oil market,” ING strategists Warren Patterson and Ewa Manthey said on Wednesday. Yet, the most recent economic data out of China continues to be a concern for the market and could result in lower demand for crude and other commodities and slower-than-expected global oil demand growth this year.  The weaker-than-expected Chinese economic data could start showing up in lower commodity exports in a few months as actual imports lag purchases, Reuters’ columnist Clyde Russell argues.  The question for the market and analysts is whether estimates about China’s oil demand growth this year have been too optimistic. Despite underwhelming economic data from China that have depressed oil market sentiment in recent weeks, no one has made any material downward revisions to their forecasts for China’s oil demand growth.

China’s economy and oil demand will be the single most important driver of oil prices this year, even if OPEC+ manages to push prices upwards, Fatih Birol, the Executive Director of the International Energy Agency (IEA), told Bloomberg on Wednesday.

“There are many uncertainties, as usual, when it comes to the oil market, and if I have to pick the most important one, it’s China,” Birol told Bloomberg TV. NN BlackMask Blog:

China’s Service Economy is BOOMING

S&P 500 and Nasdaq gave up early gains to drop on Wednesday as technology stocks reversed course, while investors awaited inflation data and the Federal Reserve’s policy meeting next week. Major technology and growth stocks fell between 0.1% and 3.1%, barring Netlfix (NFLX.O) and Tesla (TSLA.O), which rose 1.1% and 1.8%, respectively. More than half of the S&P sub-sectors declined, led by communication services (.SPLRCL) that lost 1.4%. Inflation data in the U.S. is expected to show consumer prices cooled slightly on a month-over-month basis in May but core prices are likely to have remained elevated. Pressuring stocks, the two-year U.S. Treasury yield and the benchmark 10-year yield climbed after the Bank of Canada raised interest rates, adding to market apprehension around the Fed’s interest rate decision. Money market participants now see a 69% chance that the U.S. central bank will skip raising interest rate in its June meeting but will hike in July, down from nearly 77% earlier, according to the CME’s Fedwatch tool. U.S. shares have recently been boosted by a rally in megacap stocks and a stronger-than-expected earnings season, with the S&P 500 (.SPX) up almost 20% from its October 2022 lows. The fall on Wednesday is reflective of a lack of confidence in investors over the sustainability of the rally, as it is dependent on a small concentration of major names, said Peter Andersen, founder of Andersen Capital Management. Some analysts say that big tech and other major growth stocks could soon see some profit-taking. Meanwhile, CBOE Volatility Index (.VIX) hit the lowest since February 14, 2020. Wells Fargo raised the price target on Netflix shares to $500 from $400 per share, the highest on Wall Street, according to Refinitiv. Energy index (.SPNY) rose 2.5% after oil prices edged higher, while the KBW Regional Banking Index (.KRX) hit a 2-month high. NN: For the record this stock market is doomed.

Oil prices edged higher on Wednesday as Saudi Arabia’s surprise weekend pledge to deepen output cuts outweighed weak Chinese export data and rising U.S. fuel stocks. Brent crude futures were up over a dollar as I write this, while U.S. West Texas Intermediate crude futures gained $1.15 to $72.73

“As things stand, the oil market is on the cusp of a massive shortfall,” said PVM Oil’s Stephen Brennock.

“Additional Saudi cuts are expected to deepen the market deficit to more than 3 million bpd in July by some estimates”. Prices fell earlier in the session on weak Chinese economic data and rising U.S. fuel inventories. China’s exports shrank much faster than expected in May and imports fell, albeit at a slower pace, as manufacturers struggled to find demand abroad and domestic consumption remained sluggish. Wednesday’s data also showed that crude oil imports into China, the world’s largest oil importer, rose to their third-highest monthly level in May as refiners built up inventories. A JP Morgan note showed forward crude cover in the country has climbed, indicating refiners have not increased processing rates but are instead storing oil. U.S. gasoline inventories, meanwhile, rose by about 2.4 million barrels and distillates inventories were up by about 4.5 million barrels in the week ended June 2, market sources said on Tuesday, citing American Petroleum Institute figures. The unexpected build in fuel inventories raised concerns over consumption by the world’s top oil user, especially as travel demand grew during the Memorial Day weekend. The U.S. Energy Information Administration (EIA) on Tuesday said that U.S crude oil production this year would rise faster and demand increases would be slower than previously expected. NN BlackMask Blog:

The Saudis Can Pull This Off

‘Awesome day today,’ tweeted Phil Mickelson, while Trump called it ‘great news.’ But reactions from other golfers have been mixed

The PGA Tour, the DP World Tour and the Saudi-backed LIV Golf circuit have agreed to a landmark merger that will create one operation that aims to “unify the game of golf” — which has drawn mixed reactions from professional golfers and fans. LIV Golf, founded in 2021 in a direct challenge to the PGA Tour, has been led publicly, with funding from Saudi Arabia’s sovereign-wealth fund, by former pro Greg Norman.  As touring pros began reacting to the news Tuesday morning, notable among them was Phil Mickelson. It’s no surprise that Mickelson is all “fore” it: He was one of the first professional golfers to leave the PGA Tour for LIV, and was offered roughly $200 million to join the Saudi-backed league last year, according to the Golf Channel’s Brentley Romine. Dustin Johnson was another high-profile player who earned a big payday from LIV, reportedly bagging more than $150 million just to compete. These were controversial moves, as many golfers were criticized for joining LIV Golf and turning a blind eye to Saudi Arabia’s human-rights record. According to the U.S. State Department, Saudi Arabia has in recent years been linked to multiple human-rights violations, including unlawful killings; executions for nonviolent offenses; forced disappearances; torture and cases of cruel and inhuman or degrading treatment of prisoners and detainees by government agents, among other offenses. A U.S. intelligence assessment in 2021 concluded that Saudi Crown Prince Mohammed bin Salman had personally approved the abduction or killing of Washington Post journalist Jamal Khashoggi at a Saudi consulate in Turkey in 2018. The PGA Tour suspended Mickelson and 10 other golfers last summer, and banned other players who joined the LIV Golf International Series from participating in any PGA Tour events. Many pro golfers’ reactions to the merger were more mixed, including two PGA Tour players. “Nothing like finding out through Twitter that we’re merging with a tour that we said we’d never do that with,” wrote Canadian player Mackenzie Hughes.

https://youtu.be/MgQpiTz1Qj0

Hunting for optimists the Monday after an explosive jobs and debt-ceiling fueled relief rally that sent the S&P 500 SPX, 0.34% to the edge of a bull market, is proving a little tough. That said, there’s nothing horrible in the setup, with tech just a little softer as oil is up after Saudi Arabia pledged another production cut. “This is an unloved rally for sure – SPX above 4,200 and out of the [4,000-4,200] range just as the VIX VIX, 2.26% drops to its lowest since Feb 2020,” notes Neil Wilson, chief market analyst at Finalto. What Friday did show us is that Big Tech’s rally can spread itself around when it wants to, so more days like that and some Wall Street sourpusses may change their tune. For now, though it seems those who didn’t sell in May are being told to prune in June. Morgan Stanley’s “Worried” Mike Wilson, who still expects “a meaningful earnings recession this year (-16% year-over-year decline) that has yet to be priced in,” by stock markets. While his S&P 500 base case remains unchanged at 3,900, the lower end of Street forecasts, the strategist says investors are stuck in the middle of several ‘hotter but shorter’ earnings cycles in the context of a broader secular bull market — boom, bust, boom, the strategist said in a Sunday note. Wilson says the bank’s expectations for a bigger stock drop have been kept at bay by the outperformance of AI players and some big tech names, Fed pivot fever and hopes we’ve been through the worst of an earnings recession. But, a major repricing has hit lower quality, cyclical and small-cap stocks, he adds. The strategist offers some guidance on when the market will finally start pricing in that earnings rout, focusing on the equity risk premium (ERP) portion of the price/earnings (PE) ratio. The ERP is defined as the difference between the expected earnings yield and the yield on safe Treasurys, with a higher number meaning investors are being compensated more for putting money in stocks. He said more than 100% of the reset on PE last year was due to higher 10-year Treasury yields. “Historically, that ‘moment of recognition’ for the market typically occurs when the forward NTM [next 12 months] EPS forecast for the S&P 500 goes negative on a y/y [year over year] basis.” The expected liquidity drain from the debt ceiling passage may help push this process along, he said.

So if an investor is buying what Wilson is selling they will take his advice to stick to defensive characteristics, operational efficiency and earnings stability. But to avoid leaving things on a totally crummy note, Wilson does add a light at the end of the tunnel. Morgan Stanley expect a 23% bounce in EPS growth in 2024 and 10% in 2025, as Fed policy turns more accommodative in 2024 (not 2023).ion re-emerge

U.S. regulators are planning fresh rules that will force bigger banks to lift their capital requirements by an average 20%, The Wall Street Journal reported.

Opec+ members Saudi Arabia, the UAE, Iraq, Kuwait, Oman and Algeria will extend their voluntary oil production cuts until the end of 2024 as economic growth concerns weigh on the outlook for crude demand. Saudi Arabia, the world’s largest crude exporter, will make an additional voluntary output cut of 1 million barrels per day in July, which could be extended if required, the kingdom’s energy minister said during a press conference after Sunday’s Opec+ meeting.

“I would have to call it the Saudi lollipop,” Prince Abdulaziz bin Salman said.

“We continue to set the example of how much one needs to be transparent in order to achieve the most … dominant and more important priorities, which is seeking stability and sustainability,” he said. The UAE, Opec’s third-largest producer, will have its voluntary cut of 144,000 bpd in place until the end of December 2024. This is “a precautionary measure, in coordination with the countries participating in the Opec+ agreement, which had previously announced voluntary cuts in April”, Suhail Al Mazrouei, the UAE’s Minister of Energy and Infrastructure, said on Twitter. “This voluntary cut will be from the required production level,” Mr Al Mazrouei said. Russia will also extend its voluntary output cut of 500,000 bpd until the end of next year.

The decision was taken “in light of the continued commitment … to achieve and sustain a stable oil market, and to provide long-term guidance for the market, and in line with the successful approach of being precautious, proactive, and pre-emptive”, Opec+ said. The move took the group’s total production curbs to 3.66 million bpd, or 3.7 per cent of global demand.