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This Friday is going to be a session for active short-term traders, and it will likely be unpleasant for investors.

Something broke in markets on Thursday. There are a few things that worry me about the latest bout of risk aversion. This is in context that I’ve been an unrelenting stocks bull since the December Fed meeting…

But now I’m uneasy…

The Thursday selloff confused people.

Initially, many blamed the comments from Fed’s Kashkari about there potentially being no US rate cuts this year.

However, a quick look at a few charts shows that (a) yields fell rather than climbed, so his hawkish lines did not impact, and (b) equities started selling off before his headlines.

It’s never a good sign when people struggle to identify why stocks have a relatively large swoon.

If an asset is weak without an obvious catalyst, it suggests that it can really get destroyed if a genuine risk materializes.

For good order, the weakness in E-minis coincided with the oil price rise that in turn followed the Netanyahu headlines.

We have key US data this morning at a time of vulnerability for the market in terms of the Fed narrative.

We’ve run a long way on the idea of the Fed being dovish despite a strong US economy.

We’re getting closer to the point where we must acknowledge that either the Fed won’t be easing soon, OR the economy is in more trouble than we thought.

It means that we’re in the unusual-in-recent-times setup where a big surprise in either direction could hurt stocks today.

(For clarity and consistency, I would only see this as a multi-week consolidation/retrenchment and not some long-term bearish turning point).

…click on the above link to read the rest of the article…

Europe Is Wargaming a Food Crisis

March 7, 2024

Europe Is Wargaming a Food Crisis

(Bloomberg) — The combined forces of El Niño and La Niña have crippled Latin American soy output. Ukrainian and Russian grain farmers have gone to war. Indonesia has banned shipments of palm oil to Europe, while China is hungry for crops. The Mediterranean region is getting more like a desert.

The year is 2024. “Food shortage in Europe? The only question is when, but they don’t listen,” says an unidentified voice in a video broadcast. The audience sits quietly — listening.

The dramatic collision of events, of course, hasn’t yet come to pass. But over two days in central Brussels last month, some 60 European Union and government officials, food security experts, industry representatives and a few journalists gathered to confront the possibility of something barely on the radar a few years ago: a full-blown food crisis.

The group sat down in a refurbished art deco Shell building to simulate what might happen, and help design policies aimed at prevention and response. A few streets away, farmers were stepping up their protests against the EU, disrupting supplies to supermarkets as if to sharpen the focus of the participants.

The plush co-working space was hardly a bunker or secure basement in a warzone. But the video images of drought, floods and civil unrest to the pounding beat of ominous music created a sense of urgency.

“Expect a level of chaos,” warned Piotr Magnuszewski, a systems modeler and game designer who has worked with the United Nations. “You may be confused at times and not have enough information. There will be time travel.”

To watch one of the best-fed regions in the world stress test its food system underscores a growing level of alarm among governments over securing supplies for their populations. In the space of four years, multiple shocks have shaken up the way food is grown, distributed and consumed.

…click on the above link to read the rest…

Europe Is Alarmed Enough To Begin Wargaming A Food Crisis

March 7, 2024

Europe Is Alarmed Enough To Begin Wargaming A Food Crisis

Governments of the European Union are engaged in wargames which simulate and foresee a global food crisis. A mix of major factors including the Russia-Ukraine war and impact on grain supplies there, as well as weather events like El Niño and La Niña and their impact on Latin American soy output, and the anti-EU farmers’ protests which have disrupted supermarket supply chains, have been cause for alarm, European officials say. Of course there’s also the example of how drastically a pandemic can interfere with supply chains. Panic buying was a trend and constant fear within the early months of the coronavirus crisis.

Bloomberg details of a conference held in Brussels last month that envisioned a 2024 to 2025 food shortage in Europe: “…over two days in central Brussels last month, some 60 European Union and government officials, food security experts, industry representatives and a few journalists gathered to confront the possibility of something barely on the radar a few years ago: a full-blown food crisis.”

Piotr Magnuszewski, a systems modeler and game designer who helped put the conference gaming scenario together told participants to “Expect a level of chaos” and cautioned, “You may be confused at times and not have enough information.”

As the report underscores, what’s remarkable about this is the fact that a continent which stands out as among the best-fed regions in the world is now busy stress testing its food system.

Below are some of the scenarios put before participants in the wargaming event last month:

* * *

Harvest failures:

“And so, it’s 2025 and there are more harvest failures. They impact animal feed prices, which curbs livestock and fish production. Some ships carrying crops turn away from Europe to cater to higher bidders elsewhere.”

Palm oil exports cut:

…click on the above link to read the rest…

France Hit By Strikes, Protests Amid Outrage At Hiking Retirement Age To 64

February 3, 2023

France Hit By Strikes, Protests Amid Outrage At Hiking Retirement Age To 64

French labor unions have been holding several days of mass strikes and protests against raising the retirement age, in a test of the momentum driving defiance to Emmanuel Macron’s signature economic reform… which is hardly surprising: France is one of the biggest “western” bastions of socialism.

As Bloomberg reports, the country’s rail operator, SNCF, said only one-third of high-speed TGVs were running and urged people to work from home. Subway and commuter trains serving the capital were severely disrupted, with limited service on most lines. Many schools were also closed.

Protesters also blocked three oil refineries operated by TotalEnergies SE and strikes by Electricite de France SA’s workforce took more than 3 gigawatts of nuclear-reactor capacity offline. Air France-KLM’s French arm said it had scrapped 10% of short-haul flights.

Macron, already very unpopular, has faced the biggest protests yet of his time as president on Jan. 19 when the country’s usually fragmented unions united to bring more than 1.1 million people onto the streets. Polls carried out since suggest opposition is growing: a Feb 1 poll carried out by BVA for RTL which surveyed 1,001 people showed that 60% of participants oppose pension reform, up 2 points.

Speaking to French television channels at the start of the Paris March on Tuesday, CGT union head Philippe Martinez said there were more people in the streets than Jan. 19.

“The president and the government must hear the discontent and change their plan,” Martinez said, and perhaps he is right: after all, why work when the ECB can just print and make everyone super wealthy.

According to a government count mid-way through the day, fewer public sector workers went on strike than Jan. 19. Martinez said many chose not to this time in order to preserve their wages, while a bigger turnout of white collar, private sector workers made up the numbers.

…click on the above link to read the rest…

Amazon Packages Burn in India, Final Stop in Broken Recycling System

December 31, 2022

Amazon Packages Burn in India, Final Stop in Broken Recycling System

Plastic wrappers and parcels that start off in Americans’ recycling bins end up at illegal dumpsites and industrial furnaces — and inside the lungs of people in Muzaffarnagar.

Muzaffarnagar, a city about 80 miles north of New Delhi, is famous in India for two things: colonial-era freedom fighters who helped drive out the British and the production of jaggery, a cane sugar product boiled into goo at some 1,500 small sugar mills in the area. Less likely to feature in tourism guides is Muzaffarnagar’s new status as the final destination for tons of supposedly recycled American plastic.

On a November afternoon, mosquitoes swarmed above plastic trash piled 6 feet high off one of the city’s main roads. A few children picked through the mounds, looking for discarded toys while unmasked waste pickers sifted for metal cans or intact plastic bottles that could be sold. Although much of it was sodden or shredded, labels hinted at how far these items had traveled: Kirkland-brand almonds from Costco, Nestlé’s Purina-brand dog food containers, the wrapping for Trader Joe’s mangoes.

Most ubiquitous of all were Amazon.com shipping envelopes thrown out by US and Canadian consumers some 7,000 miles away. An up-close look at the piles also turned up countless examples of the three arrows that form the recycling logo, while some plastic packages had messages such as “Recycle Me” written across them.

A worker sorts through a pile of plastic discarded from a paper mill, identifying metal and other items to recycle at a plastic scrap contractors yard, in Muzaffarnagar District, Uttar Pradesh, India, on Thursday, Nov. 17, 2022.

A child holds a discarded toy at a plastic scrap contractors yard, in Muzaffarnagar District, Uttar Pradesh, India, on Thursday, Nov. 17, 2022. Photographer: Prashanth Vishwanathan/Bloomberg

Workers leave after a days work at a plastic scrap contractors yard, in Muzaffarnagar District, Uttar Pradesh, India, on Thursday, Nov. 17, 2022. Photographer: Prashanth Vishwanathan/Bloomberg

Waste pickers in Muzaffarnagar sift through mounds of plastic trash for metal cans or or intact plastic bottles that could be sold, while children look for discarded toys. Photographer: Prashanth Vishwanathan/Bloomberg

Plastic that enters the recycling system in North America isn’t supposed to end up in India, which has since 2019 banned almost all imports of plastic waste. So how did Muzaffarnagar become a dumping ground for foreign plastic?

…click on the above link to read the rest…

The US Northeast is hurtling toward a winter heating crisis

December 24, 2022

In the most densely populated corner of the US, temperatures are about to drop after a stretch of unusually warm weather. And the signs of a winter crisis are already multiplying.

Heating oil delivered to New York is the priciest ever. Retailers in Connecticut are rationing it to prevent panic buying. New England’s stockpiles of diesel and heating oil — the same product, taxed differently — are a third of normal levels. Natural gas inventories are also below average. A Massachusetts-based utility is imploring President Joe Biden to prepare emergency measures to prevent a gas shortage.

Add some cold to the mix, and in the best-case scenario, Northeast consumers will shoulder the highest energy bills in decades this winter. The Biden administration, under pressure to tame prices ahead of the midterm elections, is considering ways to stash more diesel and gasoline in New England. In the worst-case scenario, a cluster of states with a combined economy bigger than Japan’s will run out of fuel to keep the lights on and heat homes and businesses.

“It’s going to be pretty bad,” said Marcus McGregor, head of commodities research at Conning Inc. “Diesel, heating oil and natural gas prices are through the roof. When you’re on a fixed salary, how does it impact your overall budget? It has to be bad.”

…click on the above link to read the rest…

Nigeria Limits ATM Withdrawals To $45 Per Day To Force Govt-Controlled Digital Payments

December 8, 2022

Nigeria Limits ATM Withdrawals To $45 Per Day To Force Govt-Controlled Digital Payments

A staggering number of Nigerians love Bitcoin, but hate government cryptocurrency (CBDCs).

In April, leading cryptocurrency exchange KuCoin noted that 35% of the adult population in Nigeria – roughly 34 million adults aged 18-60, own bitcoin or other cryptocurrencies. But when it came to the country’s Central Bank Digital Currency (CBDC), the eNaira, it was a massive failure.

According to Bloomberg, only 1 in 200 Nigerians use the eNaira – despite government implemented discounts and other incentives, implemented as desperate measures to increase adoption.

Now, the government is looking to boost digital payments by limiting ATM withdrawals to just 20,000 naira, or roughly US$45 per day, Bloomberg reports, citing a circular sent to lenders on Tuesday. The previous withdrawal limit was 150,000 naira (US$350).

Weekly cash withdrawals from banks are now limited (without fee) to 100,000 naira (US$225) for individuals, and 500,000 naira (US$1,125) for corporations. Any amount above this will incur a fee of 5% and 10% respectively.

The action is the latest in a string of central bank orders aimed at limiting the use of cash and expand digital currencies to help improve access to banking. In Nigeria’s largely informal economy, cash outside banks represents 85% of currency in circulation and almost 40 million adults are without a bank account.

The central bank last month announced plans to issue redesigned high value notes from mid-December to mop up excess cash and it’s given residents until the end of January to turn in their old notes. The bank also plans to mint more of the eNaira digital currency, which was launched last year but has faced slow adoption. -Bloomberg

What’s more, new rules which will take effect Jan. 9 will ban the cashing of checks above 50,000 naira (US$112) over-the-counter, and 10 million naira (US$22,480) through the banking systems. Point-of-sale cash withdrawals have been capped at 20,000 naira ($45).

…click on the above link to read the rest…

Glencore Says This Time Is Different for Coming Copper Shortage

December 7, 2022

Glencore Says This Time Is Different for Coming Copper Shortage

(Bloomberg) — Glencore Plc added its voice to a chorus of miners warning of coming copper shortages, arguing that a “huge deficit” is looming for the crucial industrial metal.

Chief Executive Officer Gary Nagle said that while some people were assuming that the industry would lift supplies as it had in previous cycles to meet a forecast increase in demand driven by the energy transition, “this time it is going to be a bit different.”

He presented estimates showing a cumulative gap between projected demand and supply of 50 million tons between 2022 and 2030. That compares with current world copper demand of about 25 million tons a year.

“There’s a huge deficit coming in copper, and as much as people write about it, the price is not yet reflecting it,” Nagle said.

Copper miners and analysts have been warning of growing deficits starting in the mid-2020s, driven by rising demand for copper in wind and solar farms, high voltage cables, and electric vehicles. While most analysts believe that prices will rise from current levels around $8,500 a ton, there is some disagreement about how large the copper shortages might be.

Still, Nagle said that Glencore, which is one of the world’s top copper miners and traders, will wait to lift its own output of the metal until the world is “screaming” for it. “We want to see that deficit,” he said.

Nagle said that Glencore could lift its annual copper production by more than 60% from current levels of 1 million tons with expansions of its current assets. The company is also eyeing a $5.6 billion new-build project at El Pachon in Argentina.

UAE Plans $150 Billion Spending Spree To Boost Oil Output To 5MM Barrels By 2027

November 29, 2022

UAE Plans $150 Billion Spending Spree To Boost Oil Output To 5MM Barrels By 2027

With oil tumbling ahead of the grueling 2023 recession, the last thing OPEC+ and (bullish) oil traders wanted to see is even more supply coming on line, and yet that’s precisely what the a core gulf hub is proposing. According to Bloomberg, the United Arab Emirates – which in recent years has aggressively sought to diversify away from oil and to become the world’s crypto hub – will look to revert back to its core competency and plans to expand its global energy – and especially energy spending – to boost oil and natural gas production capacity.

Abu Dhabi National Oil Co., also known as Adnoc, will invest $150 billion in the five years through 2027, it said in a statement Monday. That’s an increase on the previous spending plan of $127 billion over five years that was announced a year ago.

The spending spree will try to raise crude output capacity to 5 million barrels a day by 2027, earlier than the previous target of 2030 and comes at a time when Saudi oil giant Aramco is also planning to expand its output by 12 million by 2027.

The UAE is the largest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia and Iraq. It’s spending billions of dollars to pump more oil and gas, even as the country strives to reach net-zero carbon emissions by 2050.
Oil producers have benefited for most of this year from surging prices, driven in party by Russia’s invasion of Ukraine. While Brent crude has fallen back to near where it started the year, it climbed to more than $100 a barrel in February.

Adnoc will also form a new unit for gas processing and marketing, according to a statement. It will look to sell a minority share of the business, called Adnoc Gas, through an initial public offering in Abu Dhabi in 2023.

…click on the above link to read the rest…

Power Blackout Risks Loom For Quarter Of All Americans

November 18, 2022

Power Blackout Risks Loom For Quarter Of All Americans

The US heating season has officially begun, and new warnings show that a quarter of all Americans could experience energy emergencies this winter if temperatures fall below average due to tight fossil fuel supplies.

Power grids from the Great Lakes to Louisiana, New England, Carolinas, and all of Texas are the most at risk for power supply shortfalls during high-demand periods, according to Bloomberg, citing a new report from the North American Electric Reliability Corporation (NERC), a regulatory body that manages grid stability.

NERC said a cold snap for an extended period could spark grid strain due to soaring power demand from households and businesses. This would cause supplies of natural gas, coal, and backup diesel generators to draw down more quickly and possibly experience shortages.

“The trend is we see more areas at risk, we see more retirements of critical generation, fuel challenges and we are doing everything we can.

“These challenges don’t kind of appear out of nowhere,” John Moura, NERC’s director of reliability assessment, said during a media briefing.

For instance, the demand for diesel is rising, but East Coast supplies are at record lows for this time of year. Shortage of fuel used to power the economy, from heating to trucking, has about 25 days left of supplies in storage. Any supply disruption could leave power generation plants with supply gaps this winter.

Jim Matheson, chief executive officer of the National Rural Electric Cooperative Association, told Bloomberg that electricity demand is set to outpace “available supply during peak winter conditions, consumers face an inconceivable but real threat of rolling blackouts.”

Matheson warned: “It doesn’t have to be this way. But absent a shift in state and federal energy policy, this is a reality we will face for years to come.”

…click on the above link to read the rest…

The Regime Is Shifting, And Here’s What That Means

November 17, 2022

The Regime Is Shifting, And Here’s What That Means

Authored by Simon White, Bloomberg macro-strategist,

The macro landscape is changing. Inflation will remain in an elevated and unstable regime, but the first stage of the crisis is drawing to a close. That means the dollar in a downward trend, bonds in an upward trend, stocks underperforming bonds, and growth outperforming value.

Regime shifts can be almost imperceptible in real time, but in retrospect they mark fundamental turning points. Inflation today is going through one of these shifts, analogous to the 1970s. In that decade, inflation could be understood as a play in three acts, a drama that is likely to be repeated in this cycle.

In the first act, inflation makes new highs and the Fed tightens aggressively.
The second is when inflation begins to recede, allowing the central bank to pull back from tightening.
The final act is when we see inflation return with a vengeance, eliciting a Volcker-esque monetary response and a deep recession in order to fully snuff it out.

So what’s brought the curtain down on the first act? Three important indicators have made a decisive turn:

The market is now ahead of the Fed’s rate projections (the Dots)
The real yield curve is emphatically flattening
My Advanced Global Financial Tightness Indicator (AGFTI) is rising

All through this cycle, the market has been anticipating a lower peak rate than desired by FOMC members. That changed in the last couple of months, signaling that Fed hawkishness was peaking as the market was amplifying — not inhibiting — the Fed’s intended policy.

The real yield curve had steepened relentlessly as shorter-term real rates kept falling while the Fed rate lagged inflation. But the trend definitively turned in July, pointing to a peak in the dollar…

…click on the above link to read the rest…

Peak Oil Has Finally Arrived. No, Really

September 29, 2022

Peak Oil Has Finally Arrived. No, Really

Those who have called a top in oil may finally be proven right as sharp global rate hikes hurt consumption.

Is the sun setting on oil? Photographer: Jason Alden/Bloomberg

I’ve rarely felt more trepidation about writing a column than this one. But here goes: After more than a century of almost continual growth, the world’s appetite for oil is peaking, and will soon enter terminal decline.

That’s hard to write, because those who’ve called a top in oil have a forecasting record on a par with film producer Harry Warner’s skepticism that people in the 1920s wanted to see talking pictures.

Running on Empty

Liquid fuels production isn’t expected to regain its peak levels of 102.2 million barrels a day this year or next

Source: Energy Information Administration

As far back as 1919, the chief geologist of the US Geological Survey wrote that domestic output — then running at about 960,000 barrels a day, about 6% of levels nowadays — would start falling within two to five years. In the 2000s, a dearth of oilfield discoveries led to febrile worries that supplies were running out, before the shale revolution prompted a surprise jump in production. BP Plc in 2020 predicted that consumption of liquid hydrocarbons would at best plateau for 15 years around the 97.9 million barrels a day mark it hit in 2019, before revising its forecast to a peak between the middle of this decade and 2030.

Through all that, oil demand has continued to grow as the indispensable energy carrier fueling rising global incomes and development. Still, the reserves of stamina that crude has called on to maintain its upward trajectory are finally giving out — and US Federal Reserve Chairman Jerome Powell may have just delivered the coup de grace.

…click on the above link to read the rest of the article…

German Oil Refiner Observes “Run” On Diesel & Heating Oil, Halts Deliveries

August 4, 2022

German Oil Refiner Observes “Run” On Diesel & Heating Oil, Halts Deliveries

The latest sign Europe’s energy problems are worsening is that Austrian oil and gas firm OMV AG halted crude product deliveries from storage facilities in Germany amid a “run” on supplies, Bloomberg reported.

OMV Germany said two storage facilities in the southern part of the country “are observing a current run on heating oil and … this is possibly due to crisis-driven market shortages and thus excessive speculation and stockpiling.”

“In order to secure supplies in the short and medium term, loading will now be temporarily suspended until the Burghausen refinery has resumed production,” OMV said in an emailed response, adding Burghausen and Feldkirchen’s storage facilities will restart deliveries on Aug. 15.

A combination of issues has led to diesel and heating oil in southern Germany, Austria, and Switzerland.

First is the energy disruption due to Western sanctions on Russia.
Second OMV’s Burghausen refinery maintenance.
And third, falling water levels on the Rhine River have reduced deliveries of crude product shipments from the North Sea.

The panic hoarding of diesel and heating fuel likely comes from utilities who have had to switch the type of power generation from natural gas to other crude products due to capacity constraints on the Nord Stream 1.

German power prices have soared to a new record of more than 400 euros per megawatt-hour on the European Energy Exchange on Thursday on the prospects of a worsening energy crisis.

With Brent crude prices tumbling below $100 a barrel, it appears the paper oil market is out of touch with the tightness reality of physical markets.

The US Can’t Make Enough Fuel and There’s No Fix in Sight

May 17, 2022

The US Can’t Make Enough Fuel and There’s No Fix in Sight

(Bloomberg) — From record gasoline prices to higher airfares to fears of diesel rationing ahead, America’s runaway energy market is disquieting both US travelers and the wider economy. But the chief driver isn’t high crude prices or even the rebound in demand: It’s simply too few refineries turning oil into usable fuels.

More than 1 million barrels a day of the country’s oil refining capacity — or about 5% overall — has shut since the beginning of the pandemic. Elsewhere in the world, capacity has shrunk by 2.13 million additional barrels a day, energy consultancy Turner, Mason & Co. estimates. And with no plans to bring new US plants online, even though refiners are reaping record profits, the supply squeeze is only going to get worse.

“We are on the razor’s edge,” said John Auers, executive vice president at Turner, Mason & Co. in Dallas. “We’re ripe for a potential supply crisis.”

The dearth of refining capacity has dire implications for both US consumers and global markets. At home, retail gasoline prices continue hitting new records, exacerbating some of the worst inflation American households have ever seen. Meanwhile, the East Coast is on the brink of a diesel shortage that risks crippling already strained supply chains that have disrupted the flow of everything from grocery staples to construction supplies in the last two years.

The factors fueling the refining shortage won’t surprise anyone: With demand for gasoline and jet fuel practically vanishing during the height of the pandemic, companies closed some of their least profitable crude-processing plants permanently…

…click on the above link to read the rest of the article…

Just a hint from the mainstream that limits precipitate rising oil prices

May 16, 2022

Just a hint from the mainstream that limits precipitate rising oil prices

Last week a Bloomberg writer at the very end of an article explained that the “only solution” to high gasoline and diesel prices is recession. While I would not accuse the writer of advocating degrowth—this would be too radical for a mainstream business publication—his analysis points to a key and obvious cause of today’s high prices for oil and other commodities: There isn’t enough of them to go around.

There’s an old saying in the oil industry that the solution to high prices is high prices. The logic is that high prices will do two things: 1) Reduce demand as those who cannot afford oil products at high prices will cut back and 2) incentivize more exploration and production as companies seek to increase production to take advantage of high prices.

The big question today is whether the second mechanism can actually ramp up oil production enough to bring down prices. In a recent survey a large number of oil executives said their production plans do not depend on current prices. Many cited the desire of investors in publicly traded companies to receive larger dividends and benefit from the corporate buyback of shares (which tends to increase the stock prices as fewer shares are available for trading).

It’s instructive that 9 percent of those responding to the survey cited an oil price of $120 per barrel as the level at which they would consider raising production. And keep in mind that they are NOT talking about $120 per barrel for a few months, but as an average price over many years—since it can take many years to bring large projects into production and those projects can produce for many years after production begins…

…click on the above link to read the rest of the article…

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