Energy Transition | AI | Shifting World Order, Mint Finance

Suhas Reddy

Energy Transition | AI | Shifting World Order

Deep Fundamental Analysis

Mint Finance

Mint Finance's investment research blends deep fundamental analysis with technical & quant insights. Investment strategies straddle across multiple asset classes with risk management embedded into every trade to deliver an outsized reward-to-risk ratio.

Mint Finance's research is centered around three key themes. First, energy transition and climate change. Second, artificial intelligence. Third, shifting world order with its impact across politics and monetary economics.

Macroeconomics

<ul>
<li>Although the Fed paused rate hikes in July 2023, the dollar remained strong buoyed by the US economy outperforming other advanced economies.  </li>
<li>A strong dollar usually benefits domestic businesses and small caps but hurts export-focused companies and large caps in the US.</li>
<li>The current account deficits of emerging nations have been worsening due to the strong dollar and rising energy prices.</li>
</ul>


Although the Fed paused rate hikes in July 2023, the dollar remained strong buoyed by the US economy outperforming other advanced economies.  
A strong dollar usually benefits domestic businesses and small caps but hurts export-focused companies and large caps in the US.
The current account deficits of emerging nations have been worsening due to the strong dollar and rising energy prices.


Dominant Dollar (Part 1): Strong Greenback Deters EM Equities

Commodities

Crude oil is a naturally occurring, unrefined petroleum product composed of hydrocarbon deposits and other organic materials. Crude oil can be refined to produce usable products such as gasoline, diesel and various forms of petrochemicals. It is a nonrenewable resource, also known as a fossil fuel, which means that it can't be replaced naturally at the rate we consume it and is therefore a limited resource.

<ul>
<li>US commercial crude oil inventory fell by 1.36 million barrels for the week ending on 3/May, after rising by 7.3 million barrels the week before.</li>
<li>EIA increased its global liquid fuels production for 2024 and 2025 by 110,000 bpd and 40,000 bpd, respectively.</li>
<li>EIA forecasts OPEC's spare production capacity around 4 million bpd through 2025.</li>
</ul>


US commercial crude oil inventory fell by 1.36 million barrels for the week ending on 3/May, after rising by 7.3 million barrels the week before.
EIA increased its global liquid fuels production for 2024 and 2025 by 110,000 bpd and 40,000 bpd, respectively.
EIA forecasts OPEC's spare production capacity around 4 million bpd through 2025.


Balanced Fundamentals To Soften Crude Oil Prices

<ul>
<li>US Nonfarm Payrolls shows disappointing growth in jobs, much lower than the anticipated addition of 243,000 jobs.</li>
<li>April’s print is also lower than the average monthly gain of 242,000 jobs over the previous 12 months.</li>
<li>Unemployment rate comes in at 3.9%, marginally higher than analyst expectations of 3.8%.</li>
</ul>


US Nonfarm Payrolls shows disappointing growth in jobs, much lower than the anticipated addition of 243,000 jobs.
April’s print is also lower than the average monthly gain of 242,000 jobs over the previous 12 months.
Unemployment rate comes in at 3.9%, marginally higher than analyst expectations of 3.8%.


Surprise Weakness Job Growth Brings Rate Cut Closer

<ul>
<li>Chair Powell decided to maintain Fed fund rates at 5.25%-5.5% sticking to the much expected higher for longer strategy given the reverse direction of travel on rates.</li>
<li>Forget rate cuts. Those hopes are diminishing. US prediction markets are pricing a 40% chance of zero rate cuts this year.</li>
<li>Nonfarm Payroll numbers tomorrow will hint at the path of interest rate travel for the rest of the year. Continued strength will melt hopes of rate cuts further.</li>
</ul>


Chair Powell decided to maintain Fed fund rates at 5.25%-5.5% sticking to the much expected higher for longer strategy given the reverse direction of travel on rates.
Forget rate cuts. Those hopes are diminishing. US prediction markets are pricing a 40% chance of zero rate cuts this year.
Nonfarm Payroll numbers tomorrow will hint at the path of interest rate travel for the rest of the year. Continued strength will melt hopes of rate cuts further.


Strong US Payroll Will Completely Crush Rate Cut Hopes

Thematic (Sector/Industry)

<ul>
<li>This paper contrasts performance of integrated oil exploration and refining firms ("Explorers") with oil refineries ("Refiners").</li>
<li>Hypothesis is that Refiners outperform Explorers when the crack spread widens. Back testing based on select firms proves the hypothesis.</li>
<li>This paper posits that Refiners will outdo Explorers when crack spreads tear based on historical performance.</li>
</ul>


This paper contrasts performance of integrated oil exploration and refining firms ("Explorers") with oil refineries ("Refiners").
Hypothesis is that Refiners outperform Explorers when the crack spread widens. Back testing based on select firms proves the hypothesis.
This paper posits that Refiners will outdo Explorers when crack spreads tear based on historical performance.


Widening Crack Spreads Enable Oil Refiners to Outdo Oil Explorers

Suhas Reddy
Energy Transition | AI | Shifting World Order
• Mint Finance

Dominant Dollar (Part 1): Strong Greenback Deters EM Equities

The strong dollar post-Fed rate pause in July 2023 benefits US economy but hurts export-focused businesses and emerging nations' current account...

Mint Finance

Balanced Fundamentals To Soften Crude Oil Prices

US crude oil inventory decreased, EIA predicts higher global liquid fuels production, and OPEC's spare capacity to remain around 4 million bpd...

Mint Finance

Surprise Weakness Job Growth Brings Rate Cut Closer

US employment growth in April cools down and comes in lower than expected, Unemployment rate slightly above expectations, equities rally while...

Mint Finance

Strong US Payroll Will Completely Crush Rate Cut Hopes

Fed maintains fund rates at 5.25%-5.5%, Despite high inflation Chair Powell stated that rate hikes are unlikely, Continued strength in the labour...

Mint Finance

Widening Crack Spreads Enable Oil Refiners to Outdo Oil Explorers

Pure play crude oil refining and marketing firms outperformed integrated oil E&P companies during times of widening crack oil spreads.

Mint Finance

Dominant Dollar (Part 1): Strong Greenback Deters EM Equities

​The strong dollar post-Fed rate pause in July 2023 benefits US economy but hurts export-focused businesses and emerging nations' current account...

Mint Finance

Balanced Fundamentals To Soften Crude Oil Prices

​US crude oil inventory decreased, EIA predicts higher global liquid fuels production, and OPEC's spare capacity to remain around 4 million bpd...

Mint Finance

Surprise Weakness Job Growth Brings Rate Cut Closer

​US employment growth in April cools down and comes in lower than expected, Unemployment rate slightly above expectations, equities rally while...

Mint Finance

Strong US Payroll Will Completely Crush Rate Cut Hopes

Fed maintains fund rates at 5.25%-5.5%, Despite high inflation Chair Powell stated that rate hikes are unlikely, Continued strength in the labour...

Mint Finance

Widening Crack Spreads Enable Oil Refiners to Outdo Oil Explorers

Pure play crude oil refining and marketing firms outperformed integrated oil E&P companies during times of widening crack oil spreads.

Mint Finance

The strong dollar post-Fed rate pause in July 2023 benefits US economy but hurts export-focused businesses and emerging nations' current account...

US crude oil inventory decreased, EIA predicts higher global liquid fuels production, and OPEC's spare capacity to remain around 4 million bpd...

US employment growth in April cools down and comes in lower than expected, Unemployment rate slightly above expectations, equities rally while...