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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.

WTI struggles at $87 as recession worries probe OPEC's forecast and supply deficit fears intensify

Daniel Rogers

Sep 14, 2022 11:42

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After reverting from the weekly high, WTI crude oil traders seek clear direction around $87.50 during Wednesday's Asian session. However, the present hesitation in the price of black gold may be attributable to the mixed concerns regarding the demand-supply matrix.

 

The Organization of the Petroleum Exporting Countries (OPEC) indicated in a monthly report that oil consumption will climb by 3,1 million barrels per day (bpd) in 2022 and by 2,7 million barrels per day (bpd) in 2023, which is unchanged from last month. Despite obstacles such as rising prices, the news also highlighted indications that major economies were performing better than projected.

 

The news that the United States intends to replenish its emergency oil reserves, as well as the German and European move to control Russian oil and gas prices, could also be favorable for energy prices. In addition, rumors that the Western oil deal with Iran is a long way off are bolstering fears of a supply bottleneck and should have helped energy bulls.

 

Tuesday's US inflation statistics revived concerns about the Federal Reserve's fast rate hike and exacerbated recession concerns. Also acting as downward drivers for WTI crude oil are expectations of economic slowdown due to China and Russia-related concerns.

 

In spite of this, the US Consumer Price Index (CPI) for August increased by 8.3% year-over-year, surpassing market expectations by 0.1%. However, the monthly data increased to 0.1%, exceeding the -0.1% projected and the 0.0% shown in previous assessments. The core CPI, or CPI excluding food and energy, likewise exceeded the 6.1% consensus and 5.9% prior to printing at 6.3% for the month in question.

 

It should be mentioned that the weekly prints of the American Petroleum Institute's (API) industry inventory report also contributed to the commodity's downfall. The API Weekly Crude Oil Stock climbed to 6,035 million during the week ending September 9, up from 3,645,000 the previous week.

 

In the future, the price of black gold may stay under pressure due to a stronger US dollar and economic troubles. Before today's official weekly inventory data from the U.S. Energy Information Administration, however, the supply crisis concerns could test the bears (EIA). Thursday's US Retail Sales for the month of August and Friday's preliminary reading of the September Michigan Consumer Sentiment Index will also warrant close attention.

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