Publications: Notes at the Margin

Quick Thoughts (September 4, 2018)


Instead of focusing on a single matter, we briefly cover several subjects that may receive greater attention in future reports. Our topics this week are these:

  • Economic contagion. The currencies of some emerging market countries are collapsing. The declines do not bode well for economic growth in 2019 and could have significant repercussions for global oil demand.
  • US gasoline consumption. The US Bureau of Economic Analysis released data on personal consumption expenditures on August 30. These data show that consumer spending rose 0.4 percent in July compared to June and over five percent compared to July 2017. Adjusted for inflation, the year-over-year increase was three percent. Consumer spending on gasoline, though, declined. In fact, it has decreased every month in 2018 on a seasonally adjusted basis.
  • Low Atlantic Basin crude inventories. An excellent Reuters report published on August 30 detailed the reduction in Atlantic Basin stocks. Surplus holdings stored at sea seem to have been drawn down. The low inventories of generally sweet, distillate-rich crudes combined with winter’s approach point to a tightening market.
  • The continued decline in crude oil open interest. While oil prices rose significantly toward the end of August, open interest in crude futures did not. Several explanations can be offered.
  • The trade war escalation. In an interview with Bloomberg, President Trump indicated that the United States might impose further tariffs on China this week. China will retaliate. US crude and LNG will likely top the hit list. The Brent/WTI spread should widen as a result.
  • The US as a bully. Perhaps Trump’s strategy will work—at the expense of world growth.


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