Last Updated:
June 8, 2022 at 3:39 p.m. ET First
Published: June 8, 2022 at 10:19 a.m. ET
We have got a critical situation. I really think we
have a problem for the next six months…once it gets to these parabolic states,
markets can move and they can spike quite a lot.’
— Jeremy Weir,
chief executive, Trafigura
That’s Jeremy Weir, who heads up Trafigura, one of the
world’s largest commodity traders, sounding the alarm bell at the FT Global
Boardroom conference on Tuesday, according to the Financial Times . He’s the latest bigwig to sound the
alarm over the potential for global economic turmoil as the Russia-Ukraine war
stokes energy-market volatility.
JPMorgan Chase & Co. CEO Jamie Dimon last week warned
of a potential economic
“hurricane.” Wars, Dimon said said, “have unintended consequences and this
happens to be within the commodity markets of the world wheat, oil, gas and
stuff like that which, in my view, will continue. We’re not taking the proper
actions to protect Europe from what’s going to happen in oil in the short run
and we’re not taking the proper actions to protect you all … it almost has to
go up in price.”
A parabolic move would be one in which prices accelerate
exponentially to the upside. Weir told the conference that oil prices were
highly likely to hit $150 a barrel or more in coming months as the market
wrestles with strains on supply chains as Russia attempts to shift oil exports
away from Europe, the report said.
“If we see very high energy prices for a period of time we
will eventually see demand destruction,” Weir said. “It will be problematic to
sustain these levels and continue global growth.”
August Brent crude BRN00, 0.31%
BRNQ22, 0.31% ,
the global benchmark, jumped 2.5% Wednesday to close at $123.58 a barrel, while
July West Texas Intermediate crude CL.1, 0.21%
CL00, 0.21%
CLQ22, 0.25%
rallied 2.5% to finish at $122.11 a barrel — the highest settlements for both
grades since March 8. Crude rallied after data showed a rise in U.S. crude
inventories but an unexpected drop in gasoline stocks. Both WTI and Brent are
up by more than 30% since Russia’s Feb. 24 invasion of Ukraine.
Goldman Sachs on Tuesday said oil could hit
$140 a barrel in coming months. Oil remains off its all-time high just shy
of $150 a barrel set in 2008, but gasoline prices have hit records, with
analysts blaming tight supplies of products on both sides of the Atlantic and
limited refining capacity.
The S&P 500 energy sector, up by around 66% year to
date, has left all other sectors in the dust, while the overall S&P 500
index SPX, -1.08%
is down nearly 13% and the Dow Jones Industrial Average DJIA, -0.81%
has slipped 9%.
https://www.marketwatch.com/story/oil-prices-could-go-parabolic-putting-global-economy-in-critical-situation-says-trafigura-chief-11654697990?siteid=nwhpm
Oil Prices Are ‘Nowhere Near’ Peak
Yet, Says Key OPEC Member UAE June 8, 2022
Oil prices haven’t peaked yet
because Chinese demand has yet to return to normal, said the energy minister
from key OPEC member the United Arab Emirates.
The comments indicate that consumers
can expect little respite from the soaring cost of energy. The UAE is the third
largest producer in OPEC and one of the few countries in the world with the
capacity to significantly increase crude output, yet it expects supply scarcity
to worsen.
“If we continue consuming, with the
pace of consumption we have we are nowhere near the peak, because China is not
back yet,” UAE Energy Minister Suhail Al-Mazrouei said at a conference on
Wednesday in Jordan. “China will come with more consumption.”
Al-Mazrouei warned that without more
investment across the globe, the Organization of Petroleum Exporting Countries
and its allies are not able to guarantee sufficient supplies of oil as demand
fully recovers from the coronavirus pandemic.
The group agreed last week to open
its oil taps a little faster in the summer months. That modest supply boost
amounts to just 0.4% of global demand over July and August and comes after
several months in which OPEC+ has struggled to hit its production targets.
“We’re lagging by almost 2.6 million
barrels a day, and that’s a lot,” Al Mazrouei said.
Only Saudi Arabia and the UAE have
significant volumes of idle production capacity, but even that is only enough
to offset a portion of the supply gap created by sanctions on Russia.
“The situation is
not very encouraging when it comes to the quantities that we can bring,” Al
Mazrouei said.
https://www.bnnbloomberg.ca/oil-prices-are-nowhere-near-peak-yet-says-key-opec-member-uae-1.1775982
Finally, yet more sign of stagflation already turning into
the next global recession.
OECD slashes global growth
prediction on Ukraine war and China’s zero-Covid policy Published Wed, Jun 8 2022 5:00 AM EDT
The Organization for Economic Cooperation
and Development has become the latest international institution to cut its
predictions for global growth this year.
The OECD estimates that global GDP
will hit 3% in 2022 — a 1.5 percentage point downgrade from a projection done
in December.
“The invasion of Ukraine, along with
shutdowns in major cities and ports in China due to the zero-COVID policy, has
generated a new set of adverse shocks,” the Paris-based organization said in
its latest economic outlook Wednesday.
Russia’s invasion of Ukraine is
having massive ramifications on the global economy, but China’s zero-Covid
policy — a strategy Beijing uses to control the virus with strict lockdowns —
is also a drag on global growth given the importance of the country in
international supply chains and overall consumption.
The World Bank said Tuesday that it
had also turned more negative on global growth prospects. The institution said
global GDP would reach 2.9% this year — an estimate lower from its 4.1%
forecast in January.
The OECD said in its report
Wednesday that the downgrade, in part, “reflects deep downturns in Russia and
Ukraine.”
“But growth is set to be
considerably weaker than expected in most economies, especially in Europe,
where an embargo on oil and coal imports from Russia is incorporated in the
projections for 2023,” it said.
The European Union in late May moved
to impose an oil embargo on Russia, after agreeing the previous month to also
stop coal purchases from the country. The bloc has been heavily dependent on
Russian fossil fuels and cutting some of these supplies overnight will have a
significant economic impact.
Nonetheless, the euro zone, the
19-nation region that shares the euro, and the United States do not differ much
in terms of their economic outlook. The OECD said the former will grow 2.6%
this year and the U.S. will expand by 2.5%.
For the United Kingdom, where the
cost of living crisis is also an economic issue, GDP is seen at 3.6% this year
before slumping to zero next year.
“Inflation [in the U.K.] will keep
rising and peak at over 10% at the end of 2022 due to continuing labour and
supply shortages and high energy prices, before gradually declining to 4.7% by
the end of 2023,” the OECD said.
The global macro picture has
darkened for emerging economies, notably because they are expected to be hurt
the most from food supply shortages.
“In many emerging-market economies
the risks of food shortages are high given the reliance on agricultural exports
from Russia and Ukraine,” the OECD said. China is seen growing by 4.4% this
year, India by 6.9% and Brazil by a marginal 0.6%.
https://www.cnbc.com/2022/06/08/oecd-slashes-gdp-prediction-on-ukraine-war-and-chinas-zero-covid-policy.html
Global Inflation/Stagflation Watch.
Given our Magic Money Tree central banksters and our
spendthrift politicians, inflation now
needs an entire section of its own.
UK house price skyrockets to
record £289k: ‘Any mutterings of a market crash are greatly exaggerated’ Wednesday 08
June 2022 9:06 am
The average UK house price hit a
record high of £289,099 in May, but the pace of growth in values is slowing,
according to an index this morning.
Russell Galley, managing director of
Halifax, said: “The average cost of buying a home in the UK is up 1 per cent,
or £2,857, on last month, and has now risen for 11 consecutive months.
“Annual growth also remains in
double-digits, at 10.5%, although this is the slowest rate of growth seen since
the start of the year.”
Responding to today’s news, Director
of Henry Dannell, Geoff Garrett, said: “A slower rate of house price growth is
always likely to follow a reduction in buyer demand and that’s certainly what
we’re now seeing following a dip in mortgage approval activity at the start of the
year.”
He added: “Buyers are acting with
more caution with regard to the sums they are willing to borrow and, at the
same time, lenders are reducing their range of products and increasing the
rates they are prepared to offer.”
Garrett noted, however, that “it
remains to be seen as to whether this more tentative approach will reverse
upward house price trends completely, as insufficient stock remains an issue in
the current market.”
Meanwhile, the director of Benham
and Reeves, Marc von Grundherr, commented: “The fact that the annual rate of
growth continues to breach double figures is quite astonishing.”
---- James Forrester, Managing Director of Barrows and
Forrester, also discussed today’s data with City A.M.
“Any mutterings of a property market
crash have been greatly exaggerated and the UK property market has remained
impervious to the dark clouds that have been gathering over the wider economy
in recent months,” he said.
“While many will be struggling with
the increased cost of living, the hard task of saving is nothing new for the
nation’s aspirational homebuyers who continue to swamp the market while the
cost of borrowing remains very favourable.”
More
https://www.cityam.com/breaking-average-uk-house-price-skyrockets-to-record-289k/?utm_source=newsletter&utm_medium=email&utm_campaign=Before+the+Open
Column: La Nina may further
disrupt commodity markets via hurricanes June 8, 2022 9:10 AM GMT+1
NAPERVILLE, Ill., June 7 (Reuters) -
As if commodity markets needed any more drama this year, this year’s Atlantic
hurricane season could be the seventh-consecutive with above-average activity,
raising risks for U.S. grain exports as well as oil production and refining
capacity.
Significant disruptions for U.S.
commodities resulting from hurricanes are more the exception than the rule, but
tight global stocks, high prices and geopolitical conflicts could amplify any
storm impacts that surface this year.
Present for a third consecutive
year, La Nina is the primary culprit for forecasters’ beefier predictions for
hurricane season, which tends to peak in the second week of September.
La Nina-induced droughts have
already contributed to higher global grain prices, wrecking soybeans and corn
in South America over the last two seasons and whittling this year’s U.S. hard
red winter wheat crop to a 59-year low.
Unfortunately for commodity markets,
the Gulf of Mexico is a common destination for Atlantic hurricanes. Louisiana
ports are the busiest for U.S. grain exports, and about half of U.S. petroleum
refining capacity resides along the Gulf Coast.
In August 2017, Harvey made landfall
in Texas as a major hurricane, knocking up to 23% of U.S. refining capacity
offline at one point. U.S. gasoline futures surged as much as 30% in the days
following landfall, though the resulting prices were still only half of today’s
record levels.
Four years later, Hurricane Ida
damaged or destroyed several Louisiana grain export terminals, capping
September 2021 U.S. corn and soybean exports at just half the typical volume.
Strong grain exports returned in
October 2021 and gasoline futures corrected within days of Harvey’s 2017
arrival, though there may be less room for error today. Global grain shipments
are already precarious with Ukraine’s offerings still very limited.
More
https://www.reuters.com/markets/commodities/la-nina-may-further-disrupt-commodity-markets-via-hurricanes-2022-06-08/
Below, why a “green energy” economy may not be possible,
and if it is, it won’t be quick and it will be very inflationary, setting off a
new long-term commodity Supercycle. Probably the largest seen so far.
The “New Energy Economy”: An Exercise in Magical
Thinking
https://media4.manhattan-institute.org/sites/default/files/R-0319-MM.pdf
Mines, Minerals, and "Green" Energy: A
Reality Check
https://www.manhattan-institute.org/mines-minerals-and-green-energy-reality-check
"An Environmental Disaster": An EV Battery
Metals Crunch Is On The Horizon As The Industry Races To Recycle
by Tyler Durden Monday, Aug 02, 2021 -
08:40 PM
https://www.zerohedge.com/markets/environmental-disaster-ev-battery-metals-crunch-horizon-industry-races-recycle
Covid-19 Corner
This
section will continue until it becomes unneeded.
US
FDA panel backs Novavax Covid jab with hopes of persuading sceptics Protein-based vaccine is an alternative
to mRNA technology used by BioNTech/Pfizer and Moderna
Jamie Smyth in New
York June 7, 2022
US
government advisers have recommended the approval of a fourth Covid-19 jab
developed by Novavax, expressing hopes that it can help boost the nation’s
flagging immunisation programme as a new wave of infections sweeps across the
population.
Scientists
on a US Food and Drug Administration advisory panel on Tuesday voted
overwhelmingly in favour of authorising the first protein-based Covid vaccine —
a type of technology that has been used for decades against diseases including
shingles and the flu.
Some healthcare experts believe the vaccine
could win over vaccine sceptics who have so far resisted getting jabs.
Anti-vaccine campaigners have taken aim at shots developed by BioNTech/Pfizer
and Moderna, despite their effectiveness, over their use of mRNA, a new
technology.
The
panel vote represents an important milestone for Novavax, a Maryland-based
biotech company which signed a $1.6bn deal with the US government in 2020 to
develop a Covid vaccine.
Public
doubts has caused the US to lag many developed nations in Covid vaccination
rates, with about two-thirds of Americans failing to complete their primary
round, which involves two doses, and less than a third receiving a booster
shot.
“We
do have a problem with vaccine uptake in the United States, which is very
serious. Anything we can do to get people more comfortable to be able to accept
these potentially life-saving medical products is something that we feel we are
compelled to do,” Marks said.
Last month the FDA restricted the use of
Johnson & Johnson’s Covid vaccine due to a rare but serious risk of blood
clots, which left the Moderna and the BioNTech/Pfizer shots as the only
“frontline vaccines” available in the US.
The
country is averaging about 100,000 new cases a day, more than triple the level
recorded two months earlier, according to the Centers for Disease Control and
Prevention.
Hospitalisations
in the US are also rising, but the seven-day average of daily deaths has fallen
below one-tenth of its January 2021 peak.
More
https://www.ft.com/content/da0bd855-413d-4f7c-a39e-ac7f5691ed36
Next, some vaccine links
kindly sent along from a LIR reader in Canada.
NY
Times Coronavirus Vaccine Tracker . https://www.nytimes.com/interactive/2020/science/coronavirus-vaccine-tracker.html
Regulatory
Focus COVID-19 vaccine tracker . https://www.raps.org/news-and-articles/news-articles/2020/3/covid-19-vaccine-tracker
Some other useful Covid links.
Johns Hopkins Coronavirus
resource centre
https://coronavirus.jhu.edu/map.html
Centers for Disease Control
Coronavirus
https://www.cdc.gov/coronavirus/2019-ncov/index.html
The Spectator
https://data.spectator.co.uk/city/national
Technology Update.
With events happening
fast in the development of solar power and graphene, among other things, I’ve
added this section. Updates as they get reported.
Bumps could smooth quantum
investigations Models show unique properties of 2D materials stressed
by contoured substrates
Date: June 6, 2022
Source: Rice University
Summary: Materials theorists model a contoured surface
overlaid with 2D materials and find it possible to control their electronic and
magnetic properties. The discovery could simplify research into many-body
effects, including quantum systems.
Atoms do weird things when forced
out of their comfort zones. Rice University engineers have thought up a new way
to give them a nudge.
Materials theorist Boris Yakobson
and his team at Rice's George R. Brown School of Engineering have a theory that
changing the contour of a layer of 2D material, thus changing the relationships
between its atoms, might be simpler to do than previously thought.
While others twist 2D bilayers --
two layers stacked together -- of graphene and the like to change their
topology, the Rice researchers suggest through computational models that
growing or stamping single-layer 2D materials on a carefully designed
undulating surface would achieve "an unprecedented level of control"
over their magnetic and electronic properties.
They say the discovery opens a path
to explore many-body effects, the interactions between multiple microscopic
particles, including quantum systems.
The paper by Yakobson and two
alumni, co-lead author Sunny Gupta and Henry Yu, of his lab appears in Nature
Communications.
The researchers were inspired by
recent discoveries that twisting or otherwise deforming 2D materials bilayers
like bilayer graphene into "magic angles" induced interesting
electronic and magnetic phenomena, including superconductivity.
Their models show that rather than
twisting, simply stamping or growing a 2D material like hexagonal boron nitride
(hBN) onto a bumpy surface naturally strains the material's lattice, allowing
it to form pseudo-electric and pseudo-magnetic fields and possibly exhibit rich
physical effects similar to those found in twisted materials.
Flat hBN is an insulator, but the
researchers found that straining the atoms in their model created band
structures, effectively making it a semiconductor.
The advantage to their strategy,
Gupta said, is that the deformation would be highly controllable through the
surface bumps, as substrates could be accurately patterned using electron-beam
lithography. "This will also allow one to controllably change the
electronic states and quantum effects by designing substrates with different
topography," he said.
More
https://www.sciencedaily.com/releases/2022/06/220606145407.htm?utm_source=feedburner&utm_medium=email
You're never going to read 'The Wealth of Nations,'
and you shouldn't, really. It's 900 pages long.
P. J. O'Rourke.
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