Chart of the Day

The increase in oil prices to an eight-year high this week is in part because US oil supply has not caught up. Producers have been prioritizing repairing their balance sheets rather than drilling and the rig count is barely higher than after the 2014 price crash, despite prices being much higher. There are some tentative signs this is changing. In the past four weeks, the rig count has increased by the most since 2018. Still, any new supply will come online too late to make much difference in the next few months.

Macro

Ahead of the US non-farm payrolls report on Friday, the ADP employment report showed a stronger-than-expected increase of 568,000. If the NFP is strong, the Fed will announce a taper at its next meeting.

US mortgage applications are still going pretty strong after a recent rise.

Eurozone retail sales rose by 0.3% MoM in August. Consumer confidence there has held up well.

As well as the still low rig count for new drilling, the weekly EIA report showed that US crude production rose by only 0.2 mn barrels last week and is lower than before Hurricane Ida caused substantial damage.

Markets

Speculation that we might get a short term deal on the debt ceiling caused a decent rally in the S&P 500 - the entire day move was only +0.4%, but at one point the index was down by about 1.5%.

Natural gas came back down to earth a touch yesterday.

Though it’s still elevated in the grand scheme of things.

The overall GSCI all-commodity price index has risen by 6.5% in the past month. That compares to a 1.1% decrease the month before. This index is heavily influenced by the high weight of oil.

It was a strong day for the main cryptos yesterday. Bitcoin is currently up by 33.2% in the past week.

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