OIL: WTI Crude has fallen in a volatile trading session
April 23 - Americas End-of-Day Oil Summary: WTI Crude has fallen in a volatile trading session, with the main bearish driver a Reuters report that some OPEC+ members are pushing for another accelerated supply return in June, adding to negative sentiment after Kazakhstan’s energy minister said national interests take priority over OPEC+. Earlier signs that the US may ease its tariffs on China were briefly supportive.
- The WSJ reported that Trump was considering cutting tariffs on China and moving to a tiered tariff system. Trump administration officials have since countered the article, saying any tariff cut will not be unilateral.
- Reuters reports that several OPEC+ members want the group to approve another accelerated oil output increase for June at their meeting on May 5.
- Kazakhstan’s newly appointed Energy Minister Erlan Akkenzhenov said national interests take priority over OPEC+ when it comes to oil output levels.
- Oil opened higher today after President Trump’s comments that he wouldn’t fire Fed Chair Powell.
- EIA data showed US crude inventories rose less than expected by 0.24mbbl with a surge in refinery utilization and despite a large drop in exports.
- Russia’s seaborne crude shipments showed the first increase in four weeks driven by a rise in exports from the Pacific port of Kozmino and Baltic port of Primorsk, according to Bloomberg.
- Sinopec has resumed Russian oil purchases after a brief pause in March while weighing risks from US sanctions, according to Reuters sources.
- Mexico exported the first cargo of ULSD processed in its Olmeca refinery in early April, Reuters reports.
- Late headlines suggesting Kazakhstan is in ongoing talks with OPEC+ regarding oil production produced a modest price recovery.
- US cracks are higher after EIA data showed larger-than-expected stock declines for both gasoline and distillates.
- WTI June futures were down 2.0% at $62.37
- WTI July futures were down 1.9% at $61.73
- RBOB May futures were down 0.7% at $2.09
- ULSD May futures were down 1% at $2.13
- US gasoline crack up 0.6$/bbl at 24.82$/bbl
- US ULSD crack up 0.4$/bbl at 25.10$/bbl
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FED: Atlanta's Bostic Sees One Less 2025 Rate Cut Amid Slow Inflation Progress
Atlanta Fed Pres Bostic (non-2025 FOMC voter, leans hawk) says in a Bloomberg interview that he has reduced his 2025 rate cut expectations to 1 in March's economic projections versus 2 previously, "because I think we will see inflation be very bumpy", and delayed inflation progress warranted pushing back the path to neutral rates. This puts him among the 8 most hawkish FOMC members for 2025 (of 19 participants, 4 saw 1 cut, 4 saw none). We'd pointed out last week that Bostic may have taken a slightly more hawkish outlook after the Atlanta Fed's Business Inflation Expectations (BIE) survey for March showed a pickup in inflation expectations.
- His projection of inflation this year is "pretty much sideways", won't get back to 2% until 2027.
- Bostic: Undoubtedly hearing more concerns about the trajectory of the economy. The question we face now is, is consumer sentiment going to be a leading indicator like it was pre-pandemic, or will it not translate into actual behavior in the economy which is how it played out for most of the pandemic?
- He cites the Atlanta Fed BIE: looking at expected price changes, the amount of changes they expect almost match the cost of change one-to-one and we will see what happens in terms of whether customers take that on board.
- Bostic says that he's undoubtedly hearing more concerns about the trajectory of the economy. But we still see a reslient economy. The question we face now is, is consumer sentiment going to be a leading indicator like it was pre-pandemic, or will it not translate into actual behavior in the economy, which is how it played out for most of the pandemic?
- Bostic says "we have heard consistently" from businesses that pricing pressures will go higher rather than lower. At the same time, businesses are "quite bullish on sales rising as well" which suggests they believe consumers will be able to manage higher inflation - and their expected input prices match their expected charging prices almost one-to-one. Says we will see what happens in terms of whether customers take that on board.
- Says he tries not to use "that word" (transitory) about inflation: there is "a question" about whether tariffs will generate a one-off jump in inflation or otherwise. Depends on what tariffs we see and "interesting" to see how customers take them on board.
- Re the Atlanta Fed's GDPNow's negative Q1 forecast: it's a sign that the data that have come in suggests a slowdown, but most businesses I'm talking to are not reporting that kind of slowdown - we will have to wait to see what happens.
- On the QT taper decision: His preference is to "stay at this rate ($5B/Month) for a while until we decide to stop". He says that he would think about selling MBS.
