a transformative idea

market vibes (corrected)

August 13…)

“Memory believes before knowing remembers.” William Faulkner, Light in August

According to the IEA, a paris based agency, “Global oil markets are on track for a record surplus next year as demand growth slows and supplies swell. [Oil-market] balances look ever more bloated as forecast supply far eclipses demand towards year-end and in 2026. It is clear that something will have to give for the market to balance.”

The US EIA is forecasting Brent to fall to $58/barrel in Q4 2025 and “slip toward $50 in early 2026.” OPEC has avoided the market share issue as it resumed cuts of 2.2 million bpd, but from this latest report from the IEA, the United Arab Emirates increased production to 3.5 million barrels a day, a new high that’s significantly above its OPEC+ quota.

Trump, EU leaders, and Zelenskyy will meet via Zoom to discuss the war in Ukraine. JD Vance was quoted in multiple sources Sunday and yesterday, “The U.S. is done with the funding of the Ukraine war business.” Trump’s 2-minute deadline as he meets Putin will probably include this statement.

Scott Bessent said in an interview on Fox yesterday, “The real thing now to think about is should we get a 50 bps cut in September.” He hoped Stephen Miran, Trump’s pick to fill an empty FOMC seat, would be in place for the September 16/17 meeting, which would add a third certain pro-cut voice to the debate.

In the markets

September WTI expires on August 20 and liquidating weakness in the front month is leading flat prices, spreads, and open interest lower. The API reported an unexpected build in crude inventories of 1.5 million barrels vs. an expected draw of 800k. Consensus expectations for DOE data at 10:30 this morning are similarly modest.

The Sept/Oct/Nov fly has been an excellent trend indicator for many months. As Sept rolls off, October will carry the technical baton for the bears. The 2 months are falling in parity already. I don’t see an oil crash, even if Trump and Putin agree to a deal on Ukraine; no one wants more volatility. If the Permian drillers cut production, OPEC will jump in their grave

Something to keep in mind about the new US AI economy: Crude will become a source for transportation fuels and petchem exclusively. The gold under our feet is natty, which is too cheap and abundant for investors to trade futures now. But Munger would say, just wait! In the meantime, pipelines and LNG should benefit as AI capex is deployed.

A closer look at copper, past and present, updating gold after another jilting, silver and bitcoin tenaciously clinging to the highs and both bucking Blackrock ETF baggage together directly ahead, and more in the vibe this morning.