Midweek Macro Note: Latest Oil and Gas + War Updates, Asia Update Pt. 5, Bond Market Bonanza, Rate Hike Review, Portfolio Strategy Note

In this Midweek Macro Note we discuss the latest on the oil and gas markets, talk about the newest war updates, take a look at Asia markets in the Part 5 update, highlight bond market action, and more

Don Johnson (@DonMiami3), Chief Economist

Good Thursday evening MacroEdge Readers & Community,

This evening we’re going to provide a brief Midweek Macro Note after the lengthy AI Bubble + Data Center Construction report yesterday evening. The report has been well received thus far - and I don’t want to spoil any of the details if you haven’t yet had a chance to read it - you can do so below:

The war has continued to point toward signs of escalation throughout the week - even though it was leaked today that Trump attempted to pass a ceasefire to the Iranians through the Iraqi PM. Right now, oil is tilting back in a range where it becomes much less feasible for Trump to sustain the conflict going into elections in just a few months - if oil remains anywhere near these levels for a duration of time - the election is absolutely cooked for the party currently in charge across all branches of the government. At the pump, gas and diesel are both noticeably higher than a month ago - and even though demand continues to be subsidized with the Strategic Petroleum Reserve - both in the United States and abroad - we are heading toward an ‘energy emergency’ again as spreads are screaming. Today, Russia announced the possibility of a diesel export ban for a month and gasoline for 6 months - they have also begun importing crude oil from India to meet the refining gap caused by Ukrainian strikes.

For my own fill-up today (93 octane - yes, those fellow V8 owners will understand) - a full tank is back to about $110. The national average is ticking higher as gasoline futures move higher - and diesel is back near a cycle high. This weekend is going to act as a major determining factor toward any potential offramp from escalation in my opinion - as we’re riding the escalation ladder back up - this time, though, there are no airbags for politicians to ride on (maybe shorting oil futures along with BS news stories comes back in style?). It looks like the Fed will be forced to come in hawkish next week, and bond vigilantes have awakened from a multi-year slumber to actually put pressure on all of this idiocy. Wall Street and academic economists continue to whiff over and over on inflation, and just a few weeks ago were once again morphing into their true deflationista selves on a negative MoM inflation print driven by energy base effects.

As discussed in the War Note on Tuesday, the driver of market action will oscillate between oil and the bond market here for the next few weeks as everyone assesses how significant the energy impacts will be. While the United States can absorb an energy shock better than many European and Asian countries, it cannot replace the lost barrels on the market. With the Houthis (Ansarallah) threatening to close the Red Sea route, the accumulating impacts on Russian energy infrastructure, and Hormuz back to being effectively closed, these effects will compound as reserve releases wear off if closures/impacts continue.

This evening - we’re going to look at the latest oil and gas updates, provide some brief notes on the conflict from between Tuesday and now, look at Asian markets in part 5 of the brief ‘Asia Update’ briefings, and highlight action in the bond market and how the rising risks of a rate hike this year are tempering the AI/data center/tech trade.

Not yet a paid MacroEdge Ozone subscriber? Upgrade to paid to get all of our research, data, portfolio strategy, commentary, and much more below - it’s going to be a brilliant second half of the year for our team on the Substack ecosystem:

Next Reports in the Pipeline:

• Saturday Evening: Redeye Macro Note (Macro from the past week) and Non-Op Oil and Gas Opportunities

• Sunday: Weekly Macro Note

Latest Oil and Gas + War Updates

Oil and gas markets are once again flashing warning signals in terms of available inventory. Spreads are at/near all-time highs, and Brent surpassed the $100/bbl level, while other Middle Eastern crude is surpassing the $110/bbl level. I still do not think that these levels are high enough to induce demand destruction - as long as the subsidization of demand continues from the Department of Energy and the Trump Administration.

Brent-WTI spread:

(HFI Research)

• Energy equities got way, way, way oversold on the WTI ‘dip’ - this next leg up has a gap now to fill below at some point - for the time being, the pain is on as the march for WTI toward $100/bbl continues once again.

On the 10m setup, this flag setup could propel prices to $95/bbl

(continue reading with Ozone - Latest Oil and Gas Opportunities, War Updates, Asia Update Part 5, Bond Market Update, Portfolio Strategy Update + Commentary from Six)