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June 30, 2022: Top oil exporter Saudi Arabia may raise prices of light crude grades to Asia for the second straight month in August on the back of record distillate margins and strong spot premiums for Middle Eastern oil this month.

The official selling price (OSP) for Saudi's flagship Arab Light crude could rise by about $2.4 a barrel from the previous month, according to nine refining sources surveyed by Reuters on June 28-29.

The price hike would drive the August OSP close to record levels, set when May Arab Light crude reached $9.35 a barrel.

"Refining margins are very solid and we expect demand to stay robust in the near term," said one of the respondents.

Margins for gasoline, diesel, and jet fuel in Asia leaped to records in June alongside a revival of travel demand amid the easing of COVID-19 restrictions.

Spot premiums of medium-sour Oman and Dubai crude have climbed to their highest since mid-March, while light sour Murban soared to a record last week.

The monthly change in first- and third-month price spread for Middle East benchmark Dubai typically guides how much Saudi might raise or cut Arab Light's OSP.

This month, the spread widened by an average of $2.47 a barrel in backwardation - a market phase when prompt prices are higher than those in future months, indicating tight supply.

Major producers Saudi Arabia and the United Arab Emirates have flagged limited spare capacity to further boost production, while political unrest in Libya and Ecuador could further tighten oil supply.

Meanwhile, China issued 52.7 million tonnes of fresh crude oil import quotas to its independent refiners, up 49% from the same allotment last year. That will allow Chinese buyers to take more crude cargoes from the already tight global market, further driving up prices.

For other grades, respondents to Reuters' survey expect OSP for Arab Medium to raise $0.50 to $3.00 a barrel, and Arab Heavy to increase $0.50 to $2.90 a barrel.

OSP for Arab Extra Light, which typically follows Murban prices, is seen being raised as much as $5.35 a barrel. Average spot premiums of IFAD Murban against Dubai quotes increased $4.38 a barrel in June from the previous month.

Saudi crude OSPs set the trend for Iranian, Kuwaiti, and Iraqi prices, affecting about 9 million barrels per day (bpd) of crude bound for Asia.

Saudi Aramco is likely to release monthly prices after a meeting between the Organization of the Petroleum Exporting Countries and producer allies on Thursday.

Saudi Aramco officials as a matter of policy do not comment on the kingdom's monthly OSPs.

Reuters

June 30, 2022: Gold was mostly quiet on Thursday, but faced its worst quarter since early 2021, as a remarkable showing from the dollar kept investors away, with bullion's outlook clouded by top central banks adopting aggressive tactics against stubborn inflation.

Spot gold was flat at $1,817.07 per ounce by 0339 GMT. U.S. gold futures edged up 0.1% to $1,819.70.

Gold prices, set to drop for a third straight month, have fallen about 6.2% this quarter.

A combination of rising yields and the U.S. dollar have played their part in gold underperformance, City Index senior market analyst Matt Simpson said but noted that gold priced in other currencies hadn't performed too badly.

The U.S. dollar hovered near recent two-decade peaks and could record its best quarter in over five years, making gold more expensive for buyers holding other currencies. 

Bringing down high inflation around the world will be painful and could even crash growth, but must be done quickly to prevent rapid price growth from becoming entrenched, the world's top central bank chiefs said on Wednesday.

Higher bond yields and interest rate hikes by central banks to fight inflation raises the opportunity cost of holding bullion, which yields no interest. 

Bullion's performance in the second quarter erases gains made earlier in the year as a spiraling Ukraine-Russia conflict lifted demand for the safe haven, with prices back around levels they started 2022 at - just above $1,800.

Looking forward, the bias will become increasingly bearish as rate hikes continue to come through and bring down inflation expectations, Ilya Spivak, a currency strategist at DailyFX said, adding that $1,780-$1,790 is a critical support level.

Spot silver was up 0.1% at $20.72 per ounce, platinum was flat at $916.66, and palladium gained 1.2% to $1,986.21. However, they were all still headed for monthly and quarterly losses.

Reuters 

June 30, 2022: When Doug Milnes started buying cryptocurrencies in January of this year, he felt like it could become an entirely new asset class for investors.

Right now what it is making him feel is extremely unsettled.

The marketing executive from Summit, New Jersey, says his holdings, including a number of different cryptocurrencies like Ethereum, are down around 60% from where he bought. What was 2% of his portfolio is now around 0.8% – making him wring his hands about whether to hold on, head for the exits, or buy the dip.

“Crypto has gone through a number of booms and busts over time, and it’s hard to know if this time is different,” Milnes says. “I don’t know if my feelings are clouding my judgment. It’s hard to feel confident about what to do next.”

It has certainly been a harrowing year for crypto, and Milnes is not alone in trying to make sense of the plummeting charts. The total market capitalization of crypto assets has gone from almost $3 trillion in November 2021 to roughly $900 billion as of June 29, according to the tracker CoinMarketCap.

Meanwhile, bitcoin - the dominant cryptocurrency - fell from a high of more than $67,000 to its current level of just below $20,000.

“Some people set up their portfolios in the euphoria of the last few years, without much thought about a bigger plan,” said Christine Benz, director of personal finance for investment research firm Morningstar. Recent losses, she adds, are a good impetus to ask yourself some questions, including how much risk can you take and what kind of losses can you withstand?

"If you didn’t go through that process on the front end, it’s worth thinking through now,” Benz said.

Of course, crypto is hardly alone in flying through heavy 2022 turbulence. The stock markets officially dipped into bear territory earlier in June – the S&P 500 is down more than 19% year-to-date as of Wednesday, and the Nasdaq is down more than 28% over that time frame.

The unique nature of crypto has skeptics likening any moves now to “closing the barn door after the horse has bolted,” said Peter Palion, president of Master Plan Advisory in East Norwich, New York. “Except on further thought, a horse is a real thing with a real value, and crypto - as John Paulson famously said - is a limited supply of nothing.”

No matter what your personal stance on crypto, the key to handling extreme market moves is having a plan in place, so you do not act out of pure panic. A few tips from the experts:

REEVALUATE YOUR RISK TOLERANCE

If this year’s crypto swoon has made you realize you are not equipped to handle such swings, then do not assume even more risk.

After all, just because there have been heavy losses, that does not rule out more losses to come. “If you find yourself unduly rattled, maybe you’re not a good candidate for holding that asset class,” said Benz. “There’s no shame in that.”

WRITE OFF LOSSES

It may seem like cold comfort, but if you have lost value in crypto transactions, you can write off a certain amount come April 15.

“For clients who have a large position in crypto we recommend using this time to tax loss harvest,” said Kevin Lum, founder and CEO of Foundry Financial in Los Angeles.

Losses function the same as they would for equities, Lum said. If your losses exceed your total capital gains for the year, you can deduct up to $3,000 against your ordinary income. "Losses beyond $3,000 can be carried forward until death to offset future gains."

LIMIT PORTFOLIO ALLOCATION

As with any more speculative investment, it is wise to keep it to a certain percentage of your holdings – a particular “bucket” that will not swamp the rest of your portfolio.

“A good framework is to set an upper threshold,” said Benz. “Think of all your speculative assets in totality, and give them a 5% or 10% position in your portfolio – whether crypto, or precious metals, or microcap companies, or anything else.”

For example, even though Doug Milnes' crypto portfolio has been savaged, it is not like he bet his entire future on it.

“There is a lot of uncertainty about what to do next, but at least I’m not worried about my retirement,” he said. “My advice to other crypto investors would be, don’t put all your eggs in one basket.”

Reuters

June 30, 2022: Malaysian palm oil futures firmed on Thursday ahead of June export data, but worries over declining shipments and rising production set the contract for its biggest monthly slump since the 2008 financial crisis.

The benchmark palm oil contract FCPOc3 for September delivery on the Bursa Malaysia Derivatives Exchange gained 12 ringgit, or 0.24%, to 4,915 ringgit ($1,116.54) a tonne during early trade.

For the month, the contract plunged 22%, its sharpest drop since October 2008.

FUNDAMENTALS

Cargo surveyors are expected to release estimates for June exports later in the day. Traders are expecting shipments to remain weak amid top producer Indonesia's push to boost exports.

Industry groups have so far pegged a double-digit growth in production this month, although temporary mill closures in some parts of Malaysia due to declining palm prices may hurt output. 

Dalian's most-active soyoil contract DBYcv1 fell 0.2%, while its palm oil contract DCPcv1 eased 0.02%. Soyoil prices on the Chicago Board of Trade BOcv1 were up 0.2%.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Palm oil may test a support at 4,742 ringgit per tonne, as it could have completed a bounce from the recent low of 4,493 ringgit, Reuters technical analyst Wang Tao said. TECH/C

MARKET NEWS

Asian shares were ending a rough quarter in a somber mood on Thursday amid fears central banks' cure for inflation will end up sickening the global economy, though it is proving to be a fillip for the safe-haven dollar and government bonds. 

Reuters

June 30, 2022: Asian shares were ending a rough quarter in a somber mood on Thursday amid fears central banks' cure for inflation will end up sickening the global economy, though it is proving to be a fillip for the safe-haven dollar and government bonds.

Policymakers on Wednesday reiterated their commitment to controlling inflation no matter what pain it caused, and data on U.S. core prices later in the session will only underline the extent of the challenge.

"Inflation can be sticky," warned analysts at ANZ. "It is broadening from goods to services and wage growth is accelerating."

"Even with rapid rate rises, it will take time for tightness in labor markets to unwind, and that means inflation can stay higher for longer."

That suggests it is too early to pick a peak for interest rates or a bottom for stocks, even though markets have already fallen a long way.

The S&P 500 has lost almost 16% this quarter, its worst performance since the very start of the pandemic, while the Nasdaq is off an eye-watering 21%.

Early Thursday, S&P 500 futures and Nasdaq futures were both down 0.3% with little sign as yet that the new quarter will bring in brave bargain hunters.

MSCI's broadest index of Asia-Pacific shares outside Japan eased another 0.4%, bringing its losses for the quarter to 10%.

Japan's Nikkei fell 0.8%, though its drop this quarter has been a relatively modest 4% thanks to a weak yen and the Bank of Japan's dogged commitment to super-easy policies.

The need for stimulus was underscored by data showing Japanese industrial output dived 7.2% in May when analysts had looked for a dip of only 0.3%.

Chinese blue chips added 0.6% helped by a survey showing a marked pick up in services activity.

Analysts at JPMorgan are looking for a major rebound in China in the coming months and felt that, with so much bad news priced into world markets, positioning argued for a bounce.

"It is not that we think that the world and economies are in great shape, but just that an average investor expects an economic disaster, and if that does not materialize risky asset classes could recover most of their losses from the first half," they wrote in a note.

DOLLAR IN DEMAND

For now, the risk of recession was enough to bring U.S. 10-year yields back to 3.085% from their recent peak at 3.498%, though that is still up 77 basis points for the quarter.

The yield curve has continued to flatten, and turned negative in the three- to the seven-year range, while futures are almost fully priced for another Federal Reserve hike of 75 basis points in July.

The Fed's hawkishness has combined with an investor desire for liquidity in difficult times and gifted the U.S. dollar its best quarter since late 2016. The dollar index was trading up at 105.100 and just a whisker from its recent two-decade peak of 105.79.

The euro was struggling at $1.0442, having shed 5.6% for the quarter so far, though it remain just above the May trough of $1.0348.

The Japanese yen is in even worse shape, with the dollar has gained more than 12% this quarter to 136.70 and hitting its highest since 1998.

Rising interest rates and a high dollar have not been good for non-yielding gold which was stuck at $1,818 an ounce having lost 6% for the quarter. 

Oil prices were flat on Thursday amid concerns about an unseasonable slowdown in U.S. gasoline demand, even as global supplies remain tight. 

OPEC and OPEC+ end two days of meetings on Thursday with little expectation they will be able to pump much more oil despite U.S. pressure to expand quotas.

September Brent rose 2 cents to $112.47 a barrel, while U.S. crude eased 5 cents to $109.73.

Reuters