Source: Poundsterlinglive

As bitcoin mining undergoes major changes, the GCC region can have an important role in the transformation, which is being driven by a focus on renewable energy and new technology.

Abdumalik Mirakhmedov, executive president of GDA, one of the world’s largest bitcoin mining companies in terms of hash rate, says strong government support, an abundance of capital, and a commitment to sustainability are positioning the region as a growing force in the sector.

“Governments across the region are demonstrating enthusiastic support for the growth of bitcoin mining, recognizing its potential to drive broader sector development,” said Mirakhmedov, speaking from GDA’s Dubai office. “They are ramping up their green energy initiatives in a move that could propel the region to the forefront of sustainable bitcoin mining, and potentially secure a significant portion of the network’s hash rate.”

The UAE’s estimated 400 megawatts of bitcoin mining represent around four per cent of the global bitcoin mining hashrate, according to data from the Hashrate Index. The Oman government’s investment of more than $800 million in crypto-mining operations has also been widely reported.

“A common misconception about bitcoin mining is its purported dependence on fossil fuels and consequent environmental impact, but this outdated view no longer reflects reality,” said Mirakhmedov. “Current data shows that renewable energy sources now power more than 55 per cent of all bitcoin mining operations globally. Hydroelectricity, wind, and even captured methane gas have become go-to power sources for mining operations. This shift isn’t temporary, but indicative of a long-term trend, as renewable energy costs continue to decline, making them the obvious choice for miners worldwide,” he added.

Meanwhile, the adoption of advanced cooling technologies, such as liquid and immersion systems, promises to revolutionise operations, boosting energy efficiency and reducing costs. “As these technologies become more widespread, they’ll further enhance the sustainability of mining practices,” says Mirakhmedov.”

“While bitcoin mining strives to reduce its carbon footprint further, there are other benefits resulting from the industry’s ingenuity.

“In Sweden, for instance, the excess heat from mining rigs is being used to warm greenhouses and de-ice vehicles, turning what was once waste into a valuable resource. This kind of innovation will help secure the industry’s future, and the GCC region can play a big part in that.”

One of the world’s most experienced industrial-scale bitcoin mining companies, GDA operates 20 data centres across North America, South America, Europe, and Central Asia.

Source: khaleejtimes

Jet fuel production in the U.S. increased from pre-pandemic levels to 1.9 million barrels per day at the beginning of August, an increase of 8% compared to 2023

Over the summer, crude oil refiners ramped up activity to keep up with increased demand while closely monitoring the hurricane season through November 30

As people across the United States hit the road and jumped on planes this summer, gasoline demand surged. In July, demand reached 9.4 million barrels per day, equivalent to 395 million gallons per day, its highest levels since 2019, according to data from the Energy Information Administration (EIA). Strong consumption of oil coupled with the tightening of inventories could keep gasoline prices elevated for the remainder of the year.

Jet fuel production in the U.S. also soared from pre-pandemic levels to 1.9 million barrels per day at the beginning of August, an increase of 8% compared to the year prior. The Transportation Security Administration (TSA) checkpoint passenger travel numbers from January through July 2024 showed an increase of 6.2% compared to the same period in 2023, signaling a swift recovery in the civil aviation sector.

Gasoline demand topped initial projections this year. The AAA projected 70.9 million individuals will have traveled 50 or more miles from home over the summer, an increase of 5% compared to 2023. Meanwhile, Labor Day domestic travel bookings were up 9% over 2023, according to AAA.

In efforts to meet the higher demand for air travel, industry trade organization Airlines for America projected that U.S. carriers would provide an additional 26,000 scheduled flights per day, up nearly 1,400 a day from the summer of 2023. In July, North American carriers saw a 4.9% year-on-year increase in demand over the same period in 2023, according to the International Air Transport Association (IATA).

Despite the hurricane season getting off to an early start, gasoline prices in the Gulf Coast remained steady after Beryl, a Category 1 storm, reached landfall in Texas on July 8.

Lower Gasoline Prices Held Over Summer

The price of gasoline is predominantly underpinned by crude oil, as it is the primary driver, accounting for approximately 60% of the cost. The remaining 40% of the price is determined by refinery operations and distribution costs, and state and federal taxes. Front-month RBOB Gasoline futures prices averaged $2.31 per gallon in August 2024, $0.51 cents per gallon lower than they were during the same period a year prior. Gasoline prices in 2024 are expected to remain relatively flat with slower but consistent economic growth, according to the EIA.

Although jet fuel is a smaller component of the refined product mix than gasoline or other distillate fuel products, it has a significant impact on the economy. All civil aviation activity contributes about 1.3% of GDP, $535 billion in economic activity and 2.6 million jobs, according to the Federal Aviation Administration (FAA). Fuel is one of the largest, most variable expenses for airlines and represents approximately 15-20% of costs that impact the price of a passenger ticket. According to the most recent data from the Bureau of Transportation Statistics, the average price of a domestic airfare was $388 in Q1 2024 compared to $382 in Q1 2023.

Over the summer, refiners ramped up activity to keep up with increased demand while closely monitoring the hurricane season from June 1 to November 30, which could affect supply and contribute to price volatility in the future.

U.S. crude oil refiners expect to operate at approximately 90% of their combined processing capacity in the third quarter of this year. The largest U.S. refiner, Marathon Petroleum (MPC), said in August, it ran its refineries at 97% of their combined 3 million barrel-per-day capacity during the second quarter, compared to 82% in the first quarter, after their largest planned maintenance quarter in history. Marathon is positioned to run refineries at 90%, and Valero (VLO) at 92% of combined capacity in the third quarter.

In line with seasonal norms, gasoline inventories rose in the winter of 2023 in anticipation of the summer peak driving demand. Inventories took a steeper dive during the peak driving season this summer, decreasing by 3.7 million barrels to 223.8 million barrels at the end of July, 3% below the five-year average.

As gasoline transitions into the fall period, it could also be a key factor in campaigns during the upcoming U.S. election cycle. Given the upcoming uncertainty, demand for risk management in both jet fuel and gasoline markets is likely to remain strong.

Source: SEEKINGALPHA

Italy’s power utility Enel has become the latest international energy investor to scrap plans for participating in the energy transition of Vietnam.

According to unnamed sources who spoke to Reuters, Enel has decided to exit Vietnam’s wind and solar markets, with one source attributing the move to a broader company reorganization.

Earlier this year, Norway’s Equinor scrapped plans to invest in offshore wind in Vietnam. Wind turbine major Orsted also revised its plans for Vietnam, pausing a large-scale offshore development amid regulatory challenges.

Enel two years ago announced plans to invest in the construction of up to 6 GW of wind and solar capacity in Vietnam. The company, through its arm Enel Green Power, is one of the biggest wind and solar operators in the world with 64 GW of capacity. At the time it highlighted Vietnam’s considerable potential in wind and solar generation.

Indeed, Vietnam enjoys strong winds and shallow waters but at the same time, it appears to have a complicated grid connection mechanism, which has meant that a lot of completed wind and solar projects are yet to start generating because they need to be connected to the grid first.

This is rather unfortunate because Vietnam is suffering from tight energy supplies that earlier this year swung into a shortage, causing rolling blackouts. At the same time, the country has considerable ambitions in transition energy, planning to double its installed generation capacity by 2030. That capacity currently stands at some 80 GW. About a fifth of the doubled capacity should be wind turbines, per plans.

Yet it is wind power that is one of the biggest problems in Vietnam. According to Reuters, the government has yet to draft regulations for the development of offshore wind power projects and it also has to finalize negotiations on the price that it would undertake to pay to wind power project operators.

Source: OILPRICE

Flat prices in August are a welcome surprise

Inflationary pressures in Hungary eased in August. The latest data was better than expected when compared to the market consensus. Year-on-year inflation fell from 4.1% to 3.4% in August. The further moderation in inflation was partly due to the stagnation of the average price level on a monthly basis (MoM) and the high base from last year. Therefore, the strong monthly increase in July seems to have been an exception, as the stagnation in the monthly inflation rate seen in previous months has returned.

In recent months, inflation has been contained mainly by favourable developments in items outside the core inflation basket, and in August the main items of core inflation also turned more favourable. How long this will last remains to be seen, but the inflation picture is certainly improving.

Main drivers of the change in headline CPI (%)

Source: HCSO, ING

The details

Food prices did not continue to rise in August (0.0% MoM) after a surge in July (0.6% MoM), meaning that the removal of price caps and the end of mandatory in-store discounts appear to have led to a one-off repricing rather than a sustained, trend-like price increase. As a result, food inflation slowed to 2.4% YoY.

Fuel prices fell sharply in August (-0.8% MoM), following a sharp rise in July, which was widely expected. The contribution to the turnaround in inflation is therefore also significant. On the other hand, the 0.1% monthly fall in household energy is clearly a surprise, contrary to the expected rise.

Prices of durable goods rose by 0.1% on a monthly basis, in line with the global easing of pressure on these items due to lack of demand. At the same time, the price of clothing and footwear fell by 1.3% MoM, the largest fall since January.

Services should also be included among the items improving the short-term inflation picture. On a monthly basis, the increase was only 0.4%. However, due to an exceptionally low base last August, the year-on-year figure rose to 9.5%. This means that services inflation accounts for 73% of headline inflation.

The composition of headline inflation (ppt)

Source: HCSO, ING

Good news as the underlying inflation picture stabilises

Contrary to expectations, the core inflation indicator did not rise but fell slightly compared with July. The 0.3% month-on-month increase is close to the inflation target on an annualised basis. With this moderated repricing of the core basket, year-on-year core inflation was 4.63%, an improvement of 0.04ppt on the previous month. So the slowdown was just enough to help reduce the indicator due to rounding to one decimal place.

The good news continues with the National Bank of Hungary's measure of sticky price inflation, which remained unchanged at 5.8% year-on-year in August. Moreover, an important short-term indicator, the three-month annualised core inflation measure (3M/3M saar), has declined. Therefore, we can conclude that several indicators signal that the underlying inflation picture is at least stabilising, although there is still work to be done from a monetary policy perspective.

Headline and underlying inflation measures (% YoY)

Source: HCSO, NBH, ING

We revise down the inflation path

Looking ahead, we expect next month's inflation to be broadly similar to today's, with perhaps some moderation. Thereafter, however, the year-on-year rate could rise more sharply due to the low base. From October it could temporarily exceed 4% again. Looking at current inflation trends, we see the rate of price increases creeping back up to 4.8% by December 2024. This implies a significant downward revision on our part (from the 5.0-5.5% forecast range).

Given today's services inflation and the August fiscal data, we believe that the Hungarian economy could perform even more weakly in the second half of this year than previously expected. This will limit the ability of companies to reprice meaningfully, even in an environment where they face significant cost increases.

In the short term, therefore, inflationary pressures from the domestic demand side are unlikely to be significant. At the same time, inflationary risks are rising next year: the expected pick-up in consumption, continued dynamic wage growth (especially after a possible further significant increase in the minimum wage in 2025) and the government's recent tax measures are likely to be passed on to consumers in the form of price increases next year. We expect average price increases of 3.8% in 2024 and 4.2% in 2025.

The door is open for a 25bp cut in September

From a Hungarian monetary policy perspective, the incoming inflation data opens the door for a 25bp rate cut in September. A 50bp cut by the Fed (our low-conviction base case) and a dovish tone from the ECB (alongside its 0.25ppt rate cut) would reinforce this call.

On the other hand, "only" a 25bp cut by the Fed and a hawkish message from the ECB that the September cut will certainly not be followed by another one in October would make the decision between a hold and a 25bp cut in Hungary a bit more nuanced.

Ultimately, the EUR/HUF exchange rate could be the deciding factor and here the latest negative news (renewed and escalating disharmony between the government and the National Bank of Hungary) increases the country’s risk premium, which is also a key factor in the careful, patient and now stability-oriented monetary policy.

If steep interest rate hikes failed to slow the U.S. economy much in recent years, it is reasonable to ask whether their reversal will prove as toothless in a downturn.

One of the puzzles of the past two years has been how five percentage points of tightening by the Federal Reserve between March 2022 and July 2023 had so little effect on the overall economy.

Despite the borrowing squeeze, U.S. real GDP has clocked annualized growth rates in excess of 2% in seven of the eight quarters since the middle of 2022 - and is on course to add to that tally in the three months through the end of September.

And for all its seasonal wobbles, the stock market is close to record highs.

This suggests that the economy has become increasingly desensitized to changes in short-term borrowing costs. If that is the case, then policymakers should be anxious that any slowdown from here - or even a cyclical recession - might also be inured to monetary policy easing.

Several theories about this resilience to high rates abound: the peculiarity of the COVID-19 pandemic years, including the ample household savings and government spending present before the tightening; the high level of fixed-rate debt in the U.S., most notably mortgages; and elevated aggregate corporate cash levels that more than offset the hit that small firms took from the increase in debt servicing costs.

The last of the three is perhaps the most remarkable. Net interest payments made by U.S. firms as a share of GDP were halved during the tightening cycle, according to a recent International Monetary Fund report. Other research shows U.S firms' net interest payments as a share of cash flow have also fallen since 2022 to their lowest level in almost 70 years.

Net interest payments of US non-financial firms fall as Fed rates rise

SENSITIVITY LOW

So what of the implications?

Interest rates are clearly set to come back down, with the Fed widely expected to start its easing next week. But given the limited economic impact of rates on the way up, some analysts have argued the U.S. central bank might need to push rates extremely low to stimulate the economy if a recession does indeed unfold.

U.S. stocks closed higher on Wednesday thanks to a boost from technology stocks and despite inflation data that soured investor sentiment early in the session.

Others may argue that the impact of higher rates has just been delayed and that the lagged effect over the past two years is evident in the erosion of cash levels on some household and corporate balance sheets.

But corporate borrowers are having little trouble rolling over their debt, even if they have to refinance at higher rates. Last week saw 59 new debt sales totaling more than $81 billion, the fifth-biggest weekly volume ever for investment grade companies, according to IFR.

Some investors think this complex picture should inject much more caution into the Fed's thinking than markets are currently pricing in.

Yves Bonzon, the chief investment officer at Julius Baer, reckons uncertainty regarding the transmission of monetary policy to the private sector is "very high," largely because, as he argues, interest rates rose primarily to rein in "an income-driven rather than a debt-driven economic expansion".

"If the real economy's sensitivity to interest rates is unusually low, it is not clear how asset prices will react should the Fed meet market expectations and cut aggressively."

Bonzon's main point is that Fed easing in the absence of recession may well stimulate already accelerating private-sector credit growth, spur the housing market and related sectors and even revive the rate-stricken leveraged buyout and private equity market.

"In that context, the Fed would be mindful to avoid an asset price boom-and-bust cycle," he said, adding that three quarter-percentage-point rate cuts to start would be more than enough while the U.S. central bank continues to assess things.

Hit to corp loans from Fed tightening is already fading

For BlackRock credit strategists Amanda Lynam and Dominique Bly, it all hinges on what you think the Fed is actually doing here.

Is it easing to offset signs of looming recession or just recalibrating now that inflation rates have moderated?

If it's the former, then that could result in deep policy rate cuts, but could also see a near doubling of high-yield credit spreads amid fears of a downturn.

On the other hand, the BlackRock strategists figure that if the Fed is just "normalizing" here, its terminal rate will likely end up much higher, around 3.5%, and credit spreads stay where they are.

Whatever your take, it's clear that no one - including the Fed - can be completely sure how this story will unfold over the coming year. That means investors should expect more edgy months like the one we are in right now.

Source: Theedgemarkets