In today’s briefing:
- HEM: Rolling Resilience
- Regional Economics: Dollar Dominance Being Eroded, but Not Ended
- Rising OPEC+ Supply & Weak Demand To Drag Crude Price Lower
- From Big Beautiful Bill to Bunker Busting Bombs
- Follow the DoGI
- How Trump’s Big Beautiful Bill Will Affect Commodity Markets
- Asia base oils supply outlook: Week of 7 July
- [US Nat Gas Options Weekly 2025/27] Henry Hub Dropped on Mild Forecasts and Rising Output
- Global base oils arb outlook: Week of 7 July
- Global base oils margins outlook: Week of 7 July
HEM: Rolling Resilience
- Economic activity is robust with a tight labour market.
- Price and wage inflation are generally above 2%.
- Despite predictions of a downturn, the current economic regime remains stable.
Regional Economics: Dollar Dominance Being Eroded, but Not Ended
- Structural drivers of the USD’s dominance are weakening, but powerful network effects, unrivalled market depth and lack of viable alternatives will prevent a full dethronement.
- Rather than a single replacement, a multicurrency reserve system is set to emerge — which includes several Asian currencies — especially in trade settlement and funding.
- Given Asia’s extensive holdings of USD assets, even a slight shift in allocations could send reverberations across currency and financial markets.
Rising OPEC+ Supply & Weak Demand To Drag Crude Price Lower
- Crude oil soared on conflict and sank just as fast on ceasefire. Prices surged to a 5-month high following the U.S. strikes on three Iranian nuclear facilities.
- June’s price action was driven by geopolitical shocks, not sustained fundamentals. Oversupply concerns remain dominant.
- On 05/Jul, eight key members of OPEC+ alliance agreed to raise oil output in August. Instead of the anticipated 411kbpd increase, the group opted for a steeper hike of 548kbpd.
From Big Beautiful Bill to Bunker Busting Bombs
- It had looked like the big story for June was going to be how Build Back Better, the Globalist Mantra used to cover for a huge increase in spending on the Green Industrial Complex, was being attacked by the proposed spending constraints under a different BBB, the Big Beautiful Bill that is now in the process of going through the Senate.
- Until that is we got a third BBB, the Bunker Busting Bomb as the US bombed Iran.
- As we discussed in the Ratchet and the Sausage Machine, the fall out over the BB Bill between Trump and Musk was less one of direction and more one of ideological purity; Musk despises the pork barrel nature of US political horse trading while Trump 2.0 recognises what is needed to get things done – in this case fulfil his pre election promises and prevent his previous tax cuts from being reversed.
Follow the DoGI
- It is essential to track and evaluate the global economy amid a multitude of negative and positive shocks at this time
- My experimental Diffusion of Growth Indicator (DoGI) offers a timely directional view of the global economy
- The signals from the DoGI combined with the breadth of GDP contractions can effectively assess the likelihood of a global recession
How Trump’s Big Beautiful Bill Will Affect Commodity Markets
- During the week, Trump muscled his Big Beautiful Bill through a divided congress. With that, the bill got passed even right before 4th of July.
- The nearly-900 page bill includes a tax-cut and spending package that is projected to increase the national debt by $3.3 trillion over a decade.
- Cost-saving to reduce the government debt seems to be completely from the table. The DODGE department seems compared to this bill like a joke.
Asia base oils supply outlook: Week of 7 July
- Asia’s base oils price-premium to Singapore gasoil price stays at elevated levels for heavy grades, lower-than-usual levels for light grades.
- Base oils margins incentivize refiners to maintain higher production levels for heavy grades, and to consider adjusting production levels for light grades.
- Any such moves to maintain or adjust output would coincide with rise in regional production capacity following completion of most plant-maintenance work.
[US Nat Gas Options Weekly 2025/27] Henry Hub Dropped on Mild Forecasts and Rising Output
- For the week ending 03/Jul, U.S. natural gas prices fell by 8.8% due to cooler weather forecasts, rising output, and U.S. natural gas storage builds.
- For the week ending 27/Jun, the EIA reported that U.S. natural gas inventories rose by 55 Bcf, higher than analyst expectations of a 48 Bcf build.
- Henry Hub OI PCR rose to 0.86 on 03/Jul compared to 0.85 on 27/Jun. Call OI grew by 4.5% WoW, while put OI increased by 5.3%.
Global base oils arb outlook: Week of 7 July
- US Group II export base oils price-premium to vacuum gasoil starts Q3 2025 at slightly lower levels than at start of Q3 2024.
- In Q3 2024, US base oils price premium to VGO extends rise after surging from end-Q1 2024.
- US base oils price-premium to VGO extends surge in Q3 2024 even with less feasible arbitrage to outlets like Europe, Middle East and India.
Global base oils margins outlook: Week of 7 July
- Global base oils values mostly hold firm versus feedstock/competing fuel prices, even as they remain down from recent highs in Q2 2025.
- Firm base oils margins coincide with strong diesel premium to crude oil that incentivizes refiners to boost output of the motor fuel.
- Any such move would likely impact light-grade base oils more than heavy grades, whose firm margins incentivize refiners to maintain high output of the product.
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