Daily Brief Macro: Global Commodities: Demand for Oil Is Good and more

• Brent crude has weakened by $10 since early April, with the prompt time spread indicating plentiful supply relative to consumption
• Demand for crude oil for combustive fuels like gasoline and diesel is expected to peak towards the end of the decade, while demand for natural gas liquids used in petrochemical production is set to rise
• Preliminary demand data for April showed signs of improvement, with observable oil inventories increasing, particularly in China, due to lower oil prices prompting stockpiling

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• The Holy Grail of Commodity Trading? If there is a holy grail of commodity trading, I would say it’s becoming a master in reading the movements in the futures forward curve.
• Knowing how futures contracts change and how the curve shifts from contango to backwardation, and vice versa, gives commodity traders a lot of useful info about the physical supply and demand.
• While many market participants argue about the meaning and definition of backwardation and contango, the direction in which the spreads are actually moving is far more important to us.

• The SEC’s approval of 19b-4 forms marks a critical step towards spot Ethereum ETFs, signaling a potential near-term final approval that could drive significant ETH spot buying.
• Despite recent gains following ETF approval news, Ethereum remains a laggard in the crypto rally, underperforming relative to Bitcoin and smaller cryptocurrencies like Solana, BNB, and Dogecoin.
• Bitcoin faces headwinds from an expected influx of supply due to Mt. Gox repayments and losses from the DMM hack, which could pressure BTC prices in the short term.

• Expectation of a 25 basis point cut from the ECB with a focus on delivering on that commitment
• Market pricing in an incomplete cutting cycle, with potential for further easing depending on inflation dynamics
• Long duration valuations attractive in both short and intermediate sectors of the curve, with limited risk of a significant sell-off.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• RGDP grew 8.2% in FY24, led by 9% growth in GFCF. Stronger PCE (up only 4% in FY24), aided by rebounding rural consumption, should enable 8.5% RGDP growth in FY25.
• Fiscal deficit contracted to 5.6% of GDP in FY24 (0.3pp of GDP lower than budgeted), aided by soaring direct tax and GST revenues. Lower FY25 deficit should crowd-in private investment.  
• With CPI inflation likely falling below 4%YoY in Q2FY25, we expect a 25bp rate in Aug’24. A 6%-above-normal monsoon should lower food inflation and repo-rate, further boosting FY25 RGDP growth. 

• The ECB is expected to implement rate cuts in June, followed by the BoE in August.
• Additional cuts are contingent on the Fed’s actions starting in September, while inflation is being maintained by excessive labour cost growth.
• There are concerns about premature stimulus causing bubbles like in 1998, and potential rate hikes in 2025 to reverse these cuts.

• The past week saw insights on Ace Hardware Indonesia (ACES IJ), Sumber Alfaria Trijaya (AMRT IJ), Cisarua Mountain Dairy (CMRY IJ), and Barito Renewables Energy (BREN IJ)
• There was also a macro insight into Malaysia’s FDI Outflow and further insight on AMMB Holdings (AMM MK) plus the CrossASEAN Ground Zero and Dr Andrew Stotz‘s top picks. 
• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.

• Welcome to our short and sweet weekly overview of key events, our expectations and how we position for them.
• On ISM Manufacturing (Monday). Our forecast at Steno Research is 50.2 for the ISM Manufacturing Index, slightly above the consensus of 49.9.
• April’s activity was notably weak due to several factors: tax seasonality which withdrew liquidity, a hawkish build-up of expectations ahead of the early May FOMC press conference, and weak international impulses.