OIL: Oil End of Day Summary: Crude Falls
Jul-18 18:17
WTI erased previous gains to head for losses at the close after the EU revealed its import ban on Russian refined products obtained in third countries will have a transitional period of 6 months.
- WTI AUG 25 down 0.3% at 67.31$/bbl
- The EU has adopted its latest Russia sanctions package, including a dynamic oil price cap, and sanctions on India’s Vadinar refinery, alongside sanctions on tankers involved in Russia’s energy trade.
- “After a transitional period of 6 months, it will be prohibited to EU operators to purchase, import, or transfer into the Union petroleum products obtained in a third country from Russian crude oil, as well as to provide related technical or financial assistance.”
- The eventual ban on EU imports of oil products from Russian crudes would be bullish for Middle East crude because it tightens the barrels available to Indian refiners in lieu of Russian crude, if the sanctions prove enforceable.
- The EU’s latest restrictions on Russian crude are unlikely to alter the global supply picture, Bloomberg said.
- Baker Hughes US rig cout: Oil: 422 (-2) - down 60 rigs, or 12.4% on the year and the lowest since September 2021.
- Japan’s PM Ishiba said Treasury Secretary Bessent had told him that he was sure a good deal between the US and Japan was possible.
- US President Trump was reportedly eyeing tariff rates of 10% -15% on more than 150 countries.
- In the first two weeks of July, global oil demand has averaged 105.2m b/d up by 600,000 b/d from a year earlier and largely in line with forecast, JPMorgan said.
- Iraq will raise shipments of a key crude grade in August, part of an enlarged export programme indicating that the OPEC+ member is boosting its oil production.
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FED: Dot Plot: Higher Shift In Outer Years Notable
Jun-18 18:16
The shift in the dot distribution vs March is below.
- It was a predictably close call going into this meeting between 2 cuts (3.9%) and 1 (4.1%) being signalled by the Dots for end-2025. The new Dot Plot shows 9 participants saw 1 or zero cuts, while the remaining 10 eyeing 2 or 3 cuts won the day. However, 7 of 19 members now anticipate no rate cuts this year. We think that the 8 in the 2-cut median probably reflects the core of the Committee including Chair Powell (with Gov Waller probably even more dovish at 3 cuts), but this wasn't far from signalling a higher end-year rate.
- More surprising was the shift higher in outer years, though again this was a close call.
- 10 of 19 now see a cumulative 75bp or less of cuts between now and end-2026, versus just 6 who saw such little easing at the March meeting. That said, there's one member who sees even more cumulative cuts by end-2026 than they expected before, and the median was close to remaining steady at 3.4%.
- For end-2027, there is a clearer shift with 6 dots at 3.1% now appearing in the 3.4% row. 11 of 19 members now see rates at 3.4% or higher by end-2027, versus 8 prior. This median is usually just a little above the longer-run dot, and perhaps this upward shift is reflective of the economic projections' medians showing that the 2% inflation target won't be hit by end-2027.
- On that note, none of the longer-run dot projections were changed vs March's meeting, a modest surprise given some had seen the median itself shifting up at this meeting (it remains at 3.0%).
FED: Economic Projections: Surprising Lack Of "Transitory"
Jun-18 18:05
The 2025 macroeconomic projection revisions were very close to expectations. GDP was revised down 3pp to 1.4% for 2025, with unemployment up 0.1pp to 4.4% and core PCE up 0.3pp to 3.1%.
- Less expected though not a huge surprise is the weaker GDP forecast for 2026, down 0.2pp to 1.6%, with 0.1pp higher unemployment to 4.5%.
- And Core PCE is also not seen returning to target through the 2027 horizon, which was also unexpected, potentially suggestive that the FOMC sees the current government policy mix's impact on inflation as not-quite-"transitory".
- See main variables below.
FED: FOMC Statement Comparison
Jun-18 18:03
FOMC statement comparison: https://media.marketnews.com/FOMC_Statement_Comparison_June_vs_May_ea52e6595b.pdf
