Source: EuroNews

Gunvor Group, one of the world’s biggest independent oil traders, traded a record volume of crude oil and petroleum products in the first half of the year, largely driven by a growing number of deals to move oil from the United States, the group’s chairman Torbjörn Törnqvist told Bloomberg.

Gunvor traded a record volume of 79 million tons of crude and products in the first half of 2024, Törnqvist told Bloomberg in an interview.

The rise in oil trade volumes is mostly due to more and more deals Gunvor has been agreeing to move U.S. oil and products.

“We built up a quite substantial export business out of North America, even though we only started three or four years ago,” Törnqvist told Bloomberg on the sidelines of the APPEC conference in Singapore.

Gunvor is building on its recent expansion in the United States and continues to work into its markets in Europe and in Asia, the executive said.

In the two years of energy market turbulence in 2022 and 2023, Gunvor amassed more than $6 billion in equity and has retained earnings in recent years. This surge in equity now allows Gunvor and the other major oil traders to expand their business or diversify into new investments.

The top energy commodity traders are now looking to invest part of the cash they have earned.

Some of them have embarked on a buying spree to acquire refineries that the biggest international oil and gas producers are divesting as part of strategic portfolio realignment.

While Gunvor has been setting records in its oil trading business this year, it is not overly optimistic about global oil demand for 2024.

Gunvor’s Törnqvist told Bloomberg today that the group expects oil demand to grow by only 1 million barrels per day (bpd) this year, much slower than previously expected.

That’s about the same forecast as the conservative estimate of the International Energy Agency (IEA) and twice lower compared to OPEC’s projection of 2 million bpd growth.

Source: OILPRICE

Former Federal Reserve Bank of New York president William Dudley said there’s scope for a half-point rate cut at the central bank’s meeting this week.

“I think there’s a strong case for 50,” Dudley said on last Friday at a forum organised by The Bretton Woods Committee in Singapore. “I know what I’d be pushing for.” 

Dudley, who led the New York Fed until 2018, is a Bloomberg Opinion columnist and now chair of the Bretton Woods Committee. 

The former Fed member cited a slowing US labour market, with risks to jobs greater than lingering challenges to inflation, in supporting his call for a half-point reduction. He also highlighted Fed chairman Jerome Powell’s comments at Jackson Hole last month, underscoring not wanting to see further weakness in labour.

Dudley’s remarks come even as data earlier this week showed core US inflation unexpectedly picked up in August, reinforcing expectations for a quarter-point cut next week. Dudley previously said he expected a 25-basis-point reduction.

“The question is why don’t you just get started?,” Dudley said. “It’s basically up to chairman Powell to see how much support he has for being more aggressive.”

Some Wall Street banks were outliers to a 25-basis-point rate cut expectation this month, expecting a more aggressive Fed move. After the most recent inflation data, economists at Citigroup Inc scaled down their bet to a quarter-point cut. The bank kept its call for a total of 125 basis points of easing this year.

Markets and economists remain at odds for the trajectory of US monetary policy this year. US swaps data is currently pricing in more than 100 basis points of cuts this year, as expectations grow that the economy could dip into a recession and will need more support.

Earlier this month, Fed governor Christopher Waller said he’s “open-minded” about the potential for a bigger rate cut and would advocate for one if appropriate. 

“It’s very unusual to go into the meting with this level of uncertainty — usually the Fed doesn’t like to surprise markets,” Dudley said.

Source: The edge markets

The downside risk to the US dollar posed by the Federal Reserve’s (Fed) coming interest-rate cuts is limited because other central banks are easing policy, too, according to an analyst from Goldman Sachs Group Inc. 

In fact, such synchronised cycles of rate cuts are usually associated with a stronger dollar, the currency analyst, Isabella Rosenberg, wrote in a note to clients. She based that on an analysis of rate cuts since 1995 and the degree of policy coordination among the developed nations.

“If most central banks are easing together, we can expect that to limit the degree to which Fed easing will weigh on the dollar,” she wrote. “While the market is pricing a faster Fed pivot, we still think other central banks would ease policy more if the Fed gave them the space to do so.”

The Fed is expected to make its first rate reduction this week, joining the European Central bank, the Bank of England and and others that have already started easing policy. 

The dollar has been under pressure lately as traders prepare for the Fed’s first move, which in theory should weaken demand for the currency by giving investors less incentive buy US debt. 

Such a dynamic has played out when the Fed has been out of sync with other major central banks, typically resulting in a weaker — or flat — dollar, Rosenberg said. But in this case, US rates remain relatively high and the drop in other countries saps some of the incentive to sell the dollar in order to buy assets elsewhere. Such coordinated global rate cuts can also signify economic-growth concerns that bolster the dollar, given its status as a safe haven.

“Explaining dollar performance using a single variable — the direction of Fed policy in this case — is not usually very successful,” she said. “Clearly, the relative backdrop for foreign exchange matters much more.”

Source: The edge markets

Four of the five best-performing Asian equity benchmarks this month are from the region, with Thailand leading the pack. The buying frenzy has put foreign inflows on track for a fifth consecutive week while the MSCI Asean Index is now trading near its highest level since April 2022.

Fuelling enthusiasm about markets from Indonesia to Malaysia is the relatively light positioning by foreign investors, supportive local policies, as well as attractive valuations. These advantages have set the stage for the region to capitalise on global investors’ shift away from larger peers like China, particularly given economic woes deepening in the world’s No 2 economy. 

“Asean has been ignored for so long,” said John Foo, the founder of Valverde Investment Partners Pte Ltd. “Investors are beginning to wake up to the many alpha opportunities available, from the commodity companies in Indonesia to the stable real estate investment trust market in Singapore to the tech plays in Malaysia, and the export plays in Vietnam and numerous recovery plays in Thailand.”

A key source of bullishness about Southeast Asia is the relatively light positioning in the market by foreign funds, who have room to expand their allocations. Valuations also look attractive, with the MSCI Asean index trading at 13.6 times its 12-month forward earnings estimate. That’s compared to a five-year average of 14.7 times. 

Recent positive policy catalysts such as Indonesia’s fiscal easing initiatives and measures in Thailand and Malaysia that favor stock ownership are helping too, according to Kenneth Tang, a portfolio manager at the Nikko AM Shenton Thrift Fund. The countries also benefit strongly from high representation of interest-rate sensitive and high-yield sectors from banks to property developers, he added.

Those factors have boosted Asean’s strength, with the index outperforming the MSCI Asia Pacific Index by about 14 percentage points since the start of July. 

Brokerages are taking note. Goldman Sachs Group Inc upgraded Thailand to 'market weight' from 'underweight' this month on expectations that the country’s new state-controlled Vayupak Fund will provide “both sentimental and liquidity support, attracting foreign capital back to the market”, the banks’ strategist Timothy Moe wrote in a note. Last month, Nomura Holdings Ltd upgraded Malaysian and Indonesian stocks. 

“If interest rate cuts are here to stay and there’s no recession, this rally can extend towards the end of 2025,” said Chun Hong Lee, a portfolio manager at Principal Asset Management Bhd. 

Source: Theedgemarkets