Good Sunday evening MacroEdge Readers & Community,
It’s great to be back in the driver’s seat for another Weekly Macro Note. This week is going to be spent getting back up to speed after I had a few medical incidents in the last few days that warranted the need for immediate care and time away from screens - including a concussion (ongoing). As a result, I would expect that my contributions may remain relatively limited this week in terms of depth - but we are going to be getting back up to speed now, and I apologize for the Thursday - Sunday pause in outbound reports…Please note that I will be based on PST for the first half of the week, so that may impact our publishing time as well. Have a fantastic start to the week.
As I get back on the mend, there are plenty of things going on as we wrap up the month of August - and the Oil and Gas Research reports will resume on Wednesday - which you can locate below:
To start the week - it’s relatively quiet in overnight markets - and I expect that the midterm can kicking is going to get even more noticeable from here on out (particularly with bonds and oil prices). With diesel prices sitting at near-record highs, and gasoline prices not far off - the Administration is planning to up the ante on Iran tomorrow with the ‘toughest’ economic sanctions package ever placed on the regime. What we’re likely to see, in my opinion, is Iran take that as further escalation and we’ll see them start to up the tightness in the Strait of Hormuz and Bab-el-Mandeb, of which there was a very slight spike in tanker traffic over the weekend. I think a lot of this is being coordinated now with the Chinese - especially with those vessels going through the Omani lane - and China has a vested interest in also attempting to keep oil prices out of the $95+ Brent range, even though I continue to think markets are living in the borrowed time period between now and October. The first stop for a tighter WTI market is still in the low-100s, though product markets are going to remain tighter with how tight physical inventories are now going into the fall and winter seasons. For Europe - we’re seeing that in TTF tightness.
On the macro side - quiet week in the US - it does not look like Warsh has the balls or gall or move rates up a notch in September - so that is unlikely to occur this year (especially before midterms now) regardless of what energy prices do. The only thing that could derail that is if the spike happens sooner than expected, though like the Powell-Fed, I expect that the Warsh-Fed is a Fed that will react rather than anticipate changes to inflation regimes. With inflation still as hot as it is for as long as it’s been, the i-shaped dynamic continues to ripple and the picture of that is ugly on the economy on an aggregate-real basis. Nvidia earnings this week too, and PCE, but other than that - the focus between now and the end of the year is and will likely continue to be bonds/yields and commodities/energy.
(Dutch TTF - could set its highest weekly close since the 2022 inflation cycle).
Let’s dive in…
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Weekly Macro Note Coverage
This evening - we’re going to cover the commodity picture - including the ag trade, briefly look at energy, and take a look at the Asian markets before shifting into commentary from Six on the latest themes and market trends underway. We’ll also touch on earnings from Nvidia - in which I do not expect a major reaction, and the window dressing we’ll continue to see for equity markets until the OpenAI and Anthropic IPOs… some of the most bizarre in a lifetime.
Weekly Report Schedule
This week we will be moving our regularly scheduled Midweek Macro Note to Wednesday, and the below includes the next Oil and Gas Research strategy notes.
Tuesday: War Note
Wednesday: Midweek Macro Note - Oil and Gas Research Strategy Note
Friday: To Be Announced
Saturday: Oil and Gas Research Weekly Macro Note
The Commodity Picture & Ag Sphere
Bessent continues to be really cocky about his ability to control a supply shock (and yields) and I think it’s going to burn them badly - even if the burn comes late in the year and carries into next. One of the things that the Admin is struggling with most right now are ags/beef/fertilizer etc, all of which are surging higher. The increased import of foreign beef will kill domestic sellers, and eventually lead to an even tighter market - yet another example of a short term bandaid used by a politician that will cause long-term harm.
Earlier in the year, I traveled to Amarillo with Six to cover just this ‘trade’ - and the theme continues to play out, and will get tighter through the end of the year:
Our wheat experts that we talked to then correctly predicted what is happening with wheat now:
Don’t forget about that corn, too:
And beef:
Oil and Gas Update - Patience Narrative Continues
The two pathways for WTI that I see most obvious are the two below -
(Continued below: Oil and Gas Update, Asian Market Churn, Portfolio Commentary Update - Six)