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September 12th - Following the Houthi rebels capture of the key Red Sea town of Muha, the number of ships passing through the Bab el-Mandeb Strait on the 10th plummeted to single digits. Data shows that as of approximately 3 PM local time on the 10th, only six ships had passed through the strait that day, compared to 30 on the 9th, 26 on the 8th, and 29 on the 7th. The report stated that of the ships that passed through on the 10th, five carrying grain, crude oil, coal, and fertilizer left the strait, while another ship entered. The Bab el-Mandeb Strait connects the Red Sea and the Gulf of Aden and is a vital shipping route in the Middle East, handling approximately 12% of the worlds goods.September 12th - According to Canadian media reports on September 11th, Dominic LeBlanc, Canadas Minister for Canada-US Trade, stated at a cabinet meeting that there are currently no formal trade negotiations arranged between Canada and the United States, but he remains in contact with US Trade Representative Greer and US Commerce Secretary Howard Lutnick. LeBlanc said the escalating trade dispute between Canada and the United States remains a key issue for the government. The Canadian government must prepare for potential trade agreements, and any agreement must respect Canadian sovereignty and be in the national interest.On September 12, Sun Lei, Chargé dAffaires ad interim of the Permanent Mission of China to the United Nations, spoke at a high-level discussion during the UN South-South Cooperation Day commemoration on September 11, calling for deeper South-South cooperation. Sun Lei stated that China supports the statement made by Uruguay on behalf of the "Group of 77 and China" and appreciates the efforts made by the UN Office for South-South Cooperation to promote development in the Global South. Southern countries face the common task of achieving economic and social development and should adhere to the principles of independence, equality, and mutual benefit, leveraging the advantages of South-South cooperation in capacity building and knowledge sharing to form a synergy for development. China has always been a member of the Global South and welcomes the continuous enrichment of South-South cooperation mechanisms and platforms. China expects relevant cooperation to continue to be led by developing countries and demand-oriented, achieving practical results.On September 12, officials from the U.S. engineers union stated that Boeing (BA.N) and its union reached a provisional contract agreement on Friday. This four-year proposal includes a higher general wage increase than the first proposed plan. The first plan was overwhelmingly rejected by members of the Society of Professional Engineers in Aerospace Engineering (SPEEA) in a vote on August 21. If approved, approximately 17,000 members in SPEEAs professional and technical divisions would receive a 10% pay rise on October 16, followed by a 4% annual increase between 2027 and 2030, plus performance-based increases. Ben Nimgurt, Boeings vice president of production engineering and chief competency engineer, stated in a statement, "Our final contract addresses the primary concerns raised by employees and the SPEEA negotiating team, including immediate pay rises and a larger, guaranteed pay pool." According to the union, the latest proposal also includes adjustments to remote work policies and overtime restrictions for professional division members.On September 12th, a research report from Huatai Securities stated that the unexpectedly strong core inflation in August makes a September rate hike by the Federal Reserve a "must-have," further increasing the credibility risk of a September rate hike. Following the much stronger-than-expected non-farm payrolls in August and the escalating tensions in the Middle East pushing oil prices above $100, the August CPI data has become the core variable for the market pricing in whether the Fed will raise rates in September. The core CPI inflation in August rose more than expected, and the core services ex-housing component, which the Fed focuses on, did not show further signs of slowing down. Meanwhile, concerns about high oil prices due to low inventory levels, the transmission of AI price increases to downstream industries, and a new round of tariffs in certain regions could all disrupt the process of declining US inflation. Looking ahead, CPI data may push neutral voting members, represented by Walsh, to turn hawkish at the September FOMC meeting, reducing the resistance to a September rate hike due to internal divisions within the Fed; August data also cleared obstacles to a rate hike. If Walsh fails to deliver on his hawkish promises made at the August Jackson Hole meeting in September, the Feds credibility will be more challenged, and long-term Treasury yields will be more difficult to control.

In a risk-on environment with a weaker US dollar, WTI consolidates weekly losses above $83,000

Alina Haynes

Sep 09, 2022 17:17

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The price of WTI crude oil is higher for the second day in a row while paring the weekly losses at the eight-month low on Friday during the Asian session. However, by the time of publication, the black gold has reached a new intraday high of around $83.50.

 

Recent news reports from the US Treasury Department regarding the oil price cap appear to have helped drive up energy prices together with stronger sentiment and a weaker US dollar. According to the US Treasury source, "the oil price cap should be set above the marginal production cost, taking into account past Russian oil prices."

 

In other news, stronger sentiment and slow US Treasury yields cause the US Dollar Index (DXY) to fall intraday by 0.55%, to 109.05 at the latest. It's interesting to see that after a solid day, the US 10-year Treasury yields are still stuck around 3.32%, while the S&P 500 Futures tracks Wall Street's gains at approximately 4,020.

 

Recent market sentiment appeared to be aided by remarks made by US Treasury Secretary Janet Yellen, which suggested that trade relations between the US and China were set to improve. The market's attitude also appeared to have been aided by recently stronger US statistics and expectations that global central bankers will be able to offset the shock caused by inflation with a comprehensive strategy and higher rates. The Wall Street Journal (WSJ) article, on the other hand, raises some concerns about the future of China's technological enterprises and casts some doubt on the optimism.

 

A price document examined by Reuters on Friday revealed that Kuwait has decreased the official selling prices for its oil grades for the month of October from the previous month. Before the present program ends in October, US Energy Secretary Jennifer Granholm said the administration of US President Joe Biden is considering whether additional releases of crude oil from the country's emergency stockpiles are necessary. Prior to that, a Department of Energy official reportedly told Reuters that the White House was only considering releasing the 180 million barrels from the US Strategic Petroleum Reserve (SPR) that the president had already stated.

 

It should be highlighted that the recent decline in China's inflation data, coupled with the hawkish central bank activities, presents a challenge to oil purchasers. Both China's Producer Price Index (PPI) and Consumer Price Index (CPI) show unfavorable results for August. However, compared to 2.8% market expectations and 2.7% in the prior year, the headline CPI declined to 2.5% YoY, and the PPI fell to 2.3% from 3.1% projected and 4.2% in the preceding year.


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