Market's hidden vigor overlooked by bearish oil investors
In the world of geopolitics and economics, several significant developments have unfolded over the past week. Here's a roundup of some key events:
US-Belarus Ties Improve Slightly
Despite ongoing tensions, two US military observers attended exercises in Belarus, marking a potential improvement in ties between Washington and the Russian ally. This move comes as a message to Europe, according to the BBC's Russia editor, serving as a reminder of the firepower on Europe's doorstep and the potential risks of confrontation with Moscow.
Oil Markets: A Mixed Bag
The oil market is experiencing a mix of optimism and concern. On one hand, OPEC+ is signaling strength by accelerating the reversal of previous cuts, bringing back 2.2 million barrels per day over six months, instead of the original 18-month plan. This decision, however, has sparked warnings that the move could flood the market.
China, the world's second-biggest economy, is stockpiling oil aggressively, absorbing nearly 90% of the additional OPEC+ supply and channeling it into both strategic and commercial storage. This move provides China a demand cover of around 75 days, but worries over China's economic slowdown persist. In August, retail sales, industrial production, and investment levels were all below expectations, while a real estate downturn intensified.
Despite the bearish sentiment, Brent crude is holding above $65 a barrel, and new long-term market forecasts show demand rising for decades and supply at risk of underinvestment. Traders at a recent conference in Singapore repeatedly raised geopolitical risks, such as US tariffs and sanctions, unresolved wars in the Middle East and Ukraine, which have translated to a premium on oil prices and may lead to supply shortages.
US Stocks Reach Record Highs
In contrast to the oil market, US stocks shot to record highs on Monday, despite warning signs in the US labor market and "gloomy narratives" of an economic slowdown.
Nuclear Power Deal Between US and UK
The US and UK signed a major nuclear power deal to build up to 12 cutting-edge reactors in England. This deal comes as a welcome distraction for UK Prime Minister Keir Starmer, who is facing a potential revolt from within his party if local elections due next year go badly.
Controversies and Accusations
The US is increasingly breaking stride with the global scientific community on critical health issues. The Trump administration plans to link 25 children's deaths to the COVID vaccine, a claim that scientists say is based on a misunderstanding.
In Spain, the TikTok corporation has been accused of violations of competition rules by the European Commission. The commission preliminarily found TikTok in breach of the Digital Services Act, a key regulatory framework for large online platforms in the EU.
Looking Ahead
The "run it hot" trade is booming, but some experts are skeptical that the Federal Reserve's interest rate trim this week and tax cuts will provide a fresh economic boost. As we move forward, it will be interesting to see how these developments unfold and what impact they will have on the global economy and geopolitical landscape.
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