EUROZONE manufacturers reported business activity fell in February for the eighth consecutive month. Preliminary estimates from partial survey data put the purchasing managers’ index at 48.5 (25th percentile for all months since 2006) in February compared with 48.8 (26th percentile) in January:
EU EMISSIONS allowance prices have hit a record €100 per tonne of CO2 equivalent for the compliance period ending in December 2023:
CHINA’s official Xinhua news agency and other government-run sites are running multiple stories and commentaries emphasising epidemic controls must be applied with “softness”, “greater precision”, ensuring daily life and healthcare continues. There has been a marked change of tone from the previous military-themed rhetoric and analogies to battling the epidemic, with greater focus on resuming as much normality as possible. Like other governments facing widespread social unrest, China appears to be pursuing a mixed strategy of rolling up protestors, intensifying street policing, while trying to make selective concessions to keep the majority of the population in line by relaxing epidemic controls to reduce their social and economic costs.
BRENT’s calendar spreads for the first part of 2023 have slumped from a steep backwardation at the start of November close to contango as the end of the month nears. The nearest to deliver January-February spread is no longer a useful indicator as the January contract nears expiry and there is insufficient liquidity to make the price representative. But the more active February-March and March-April spreads are now trading close to flat from backwardations of around $1.50 per barrel at the start of the month.
Refiners and traders seem to have accelerated purchases ahead of the introduction of the planned G7 price cap on Russia’s crude exports from early next month to protect themselves against any possible disruption. Concern about the impact likely drove up prices and spreads in September and October.
But the cap itself now appears likely to be set at a relatively high level with relaxed enforcement, at least initially. The result is a marked softening in the market. At the same time, the business cycle continues to weaken across most of Europe and Asia, dampening crude demand. All of this is weighing on prices and spreads for nearby futures contracts with deliveries in early 2023:
U.S. RETAIL GASOLINE prices have climbed to an average of almost $5 per gallon, the highest after adjusting for wages since June 2014, when Islamic State fighters were threatening to capture the giant oilfields of northern Iraq. Wage-adjusted pump prices are in the 92nd percentile for all months since 1994, up from the 60th percentile in December 2021 and the 53rd percentile in June 2021:
U.S. ROAD FUEL prices are rising even faster than crude benchmarks, resulting in an increasing premium first for diesel and now gasoline, as refineries prove unable to keep pace with demand from freight hauliers and private motorists:
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