Comment of the Day
7th February 2023
Eoin Treacy
Feb 8
Video commentary for February 7th 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: correlation between bond yields and growth stocks cannot last indefinitely. AI stocks extend rebound, bond yields rise, oil firms, oil drillers breaking out.
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Jerome Powell Speaks With David Rubenstein
This summary from Bloomberg may be of interest to subscribers. Here is a section:
Powell says the labor market report from Friday “underscores the message” he sent last week, that there’s a significant road ahead to get inflation down. There’s an expectation that inflation can come down painlessly, but “that’s not the base case.”
Eoin Treacy's view
The primary conclusion investors have taken from Jerome Powell’s interview today is pain might be coming but rates will quickly adjust when it does. The volatility on the Nasdaq-100 showed the development of this conclusion with a 1% advance, drop back to flat and recovery to finish up 1%.
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Russia Sends More Oil by Sea, But Kremlin's War Chest Pressured
This article for Bloomberg may be of interest to subscribers. Here is a section:
The European Union’s import ban on Russia crude has led to much longer voyages for shipments, with journeys now taking an average of 31 days from Baltic ports to India, compared with just seven days from the same terminals to Rotterdam and about half that to Poland. That’s putting more pressure on the dwindling fleet of ships whose owners are willing to haul Russian cargoes. A similar pattern is expected to emerge in Russia’s refined products trade.
The country is increasingly reliant on its own tankers and a so-called “ shadow fleet” of usually older ships owned by small, often unknown companies that have sprung up in recent months. European-owned vessels can still carry Russian crude, as long as it is sold at a price below a $60-a-barrel cap, introduced at the same time as the import ban. The level of that cap is due to be reviewed in March.
There has also been a resurgence in ship-to-ship transfers of cargoes in the Mediterranean, with loads either being combined onto larger vessels or shifted from ice-class tankers to others in order to free up those ships needed for operations in the Baltic in the winter months.
Tankers hauling Russian crude are becoming more cagey about their final destinations. Vessels carrying more than 41 million barrels of Russian crude, the equivalent of 1.45 million barrels a day of exports, left port showing no clear final destination in the four weeks to Feb. 3.
Eoin Treacy's view
The prospect of buying oil at a discount will ensure there is ample demand for Russian exports of crude. The rewards are more than ample to compensate for the risks. Transfers between ships off the Malaysian coast have been ongoing for more than a year and that is unlikely to change while there is such a wide arbitrage.
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© 2023 Eoin Treacy
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