A week in which a trade deal has been struck with the Philippines, Indonesia and most importantly Japan has excited the US stock markets so much that another all-time high was registered yesterday in the S&P and Nasdaq. The S&P is worthy of note as the wide-ranging representative index has scored thirteen highs already in 2025. Given that many commentators seem to be congregating around the nearness of a European trade deal, it is doubtful the count of highs stop at this supposed unlucky number. Because next week sees the August 1st deadline on when tariff levels are to be agreed and a now market assumption that most countries want to make the best of the worst, stock pickers will not douse their fervour. If Meta, Amazon, Apple and Microsoft next week emulate the results of Alphabet, there will not be stock market bear able to show themselves in public.

There have been moments, but much of the stock market positiveness has been unable to wash up on our oily shores. There seems a vein of circumspection running through our market, or is it cynicism? Either way, oil prices refuse to drum to the wider suite’s beat and are caught in largely a holding pattern bought about inconclusive specific oil drivers. Even though the Iranian and Ukrainian situations are nowhere near resolution and untradeable, their shadows cast long over thinking and with other counterinfluence drivers keeping a weird kind of equilibrium, expressiveness in positioning is rightly holstered. The issues around CPC and Azeri loadings are now neutered by the US allowing limited licences for partners with Venezuela’s PDVSA to restart operation for oil exportation once again into Uncle Sam. This change of heart in bringing maximum pressure on President Maduro’s regime is a surprise and the reasoning behind it unclear. Speculatively, it might be how the US needs heavier crude in refinery mixes, but whatever the cause for the policy change it just sent another message to oil position takers to take the summer off.

Are PMIs at last turning friendly for oil prospects?

Although there are a few exceptions, namely Japan's, France's and Germany's manufacturing, the purchasing managers indices published from around the world yesterday does at last give some hope to an upturn in global proceedings and if made consistent, oil demand. This follows on from a report at the beginning of this month in which S&P Global pointed to a worldwide bounce in manufacturing growth, it recorded that, “the Global Manufacturing PMI, sponsored by J.P. Morgan and compiled by S&P Global Market Intelligence, rose from 49.5 in May to 50.3 in June, edging above the 50 'no change' level for the first time in three months to indicate a marginal improvement in business conditions at the end of the second quarter.” It would appear from the data yesterday that such improvement, while not earth-shattering, might see next month’s report, using July data, similarly expansive.

The ‘flash’ PMIs of Australia printed 51.6, 53.8 and 53.6 in Manufacturing, Services and Composite order and were well above the 50.6, 51.8 and 51.6 seen in June. The manufacturing expansion is the first rise in three months, supporting business growth seen by an expanding customer base and resulting in the highest new orders for over three years. In Asia, the Jibun Bank Japan Manufacturing PMI dropped to 48.8 in July from June's final reading of 50.1, while it is slightly disappointing, adjustment due to ‘front-loading’ tariffs may make up some of the decline. The anxiety caused by how a tariff deal has supressed demand and driven down output may only be made clearer when next month’s figures come after the US and Japan’s 15% agreement made earlier in the week. Arguably, and while not offering direct support to oil demand, the Services PMI reading of 53.5 versus June’s 51.7 takes some of its sting away. According to S&P Global Market Intelligence, "business activity across Japan's private sector continued to expand at the start of the third quarter, fuelled by stronger growth of the service sector."

The slowdown experienced at the end of 2024 in the eurozone saw a welcome change at the beginning of this year. ‘Front loading’ again, does take some of the reasoning for a 0.6% GDP growth in this year’s first quarter, but there is growing opinion and data to suggest a gradual reclamation of momentum. As mentioned, the HCOB French Manufacturing PMI flat reading of 48.4 against expectation and the German 49.2 below the 49.4 call offer initial resistance assessment to growth. However, they are both above the previous month’s 48.1 and 49.2 respectively and bearing in mind a year ago France’s was in heavy contraction at or around the 44.0 number and Germany even worse at below 43.0, these are marked, albeit slow improvements. Overall, the eurozone Manufacturing PMI reading of 49.8 was in line with expectation and not only homing in on expansion but is importantly the best reading for three years. Bloomberg intelligence notes the eurozone’s Composite PMI reading of 51.0 represents the quickest pace of growth in the private sector since August of last year. Even the associated UK economy’s fall from grace still manages to keep both Services PMI (51.2) and Composite PMI (51.0) in expansion with the Manufacturing PMI reading of 48.2 beating its 48.0 call.  

The manufacturing PMIs listed here do not yet translate into higher oil demand. Yet, the warnings they offered after Covid, and for Europe in particular the ravages of the Ukraine war and the need to rid itself of Russian energy are not blowing holes into PMI data anymore. The complexities of the geoeconomic picture across the globe are vast. Taking this pointed data snapshot and calling a full-blown bull run for oil is both unwise and ridiculous. The effects of higher tariffs from the United States have been seen emotionally; how they fundamentally play out, when eventually all established, will take time to materialise and assess. These improved, overall readings in PMIs are hardly game changing. There is no need for repetition of the 1980s film ‘Wall Street’ and to adapt Gordon Gecko’s eponymous line, “Blue Horseshoe loves December Brent”, but PMIs are no longer a convincing source for bears.

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