The decision by OPEC+ to lift production by 137kbpd as of October in the end came as no surprise, but because the increase is lighter than some had expected this morning’s response in an uptick in prices is how the extra flow of oil will not really affect proceedings for a while. Given the predicted paucity of Distillate production going into the colder months and a refinery turnaround season, the market deems such strength in the likes of Heating Oil, Diesel and their like a little more current than a probable burgeoning feedstock scenario next year. What aggravates prices higher is another bout of missile attacks from Russia into Ukraine. The main building of government in Kyiv was hit for the very first time since the conflict started and a response is seen from Washington. Donald Trump said in passing that some leaders of Europe would be invited for discussions over the war, giving rise to speculation that sanctions and secondary tariffs are back on the table.

There is also a chiming with a greater risk tone seen in the wider suite. Given the expected poor showing in the US Non-Farm Payrolls, pricing once again increases for a FED rate cut, and even some overly-bullish calls that there might be a double fifty-point shave in September. Cooler heads believe three cuts in total will be seen before the year is out, but either way, it enables the stock market bulls to take up a default buy program. The resignation of Japan’s Prime Minister, Shigeru Ishiba, also rallies stocks as vox pop believes a dovish replacement will be seen with a resultant burst from the Nikkei helping things along. With a vote of confidence in France this week likely seeing the undoing of the government, politics across the globe is going to be the main provider of swing in the next five trading days.

Europe needs President Trump's action, not criticism

It comes to something when the US President barks European leaders on how the continent must stop buying Russian oil. Joining a phone call last week which sought to find a path to security for Ukraine should a ceasefire ever deem it possible to show up, President Trump went on an excursion of berating Emmanuel Macron et al for being complicit in funding Russia’s war machine. It is hard not to develop a sense of surrogacy in indignation at the sheer pomposity and audacious nerve of someone who might not have paid oil revenue into the Kremlin’s coffers, but sure has enabled President’s Putin’s confidence that he can wage war without any meaningful intervention from the only real superpower. Donald Trump could be offered a pass if he took power in the White House with a ‘no interest’ in Ukraine banner running before his election victory. But he did not, CNN, and let us not be coy the network is no fan of Trump and has an agenda, have fact-checked on how the Donald uttered fifty-three times that he would end the Ukraine war within twenty-four hours of taking office. The other protagonists involved in the ‘Coalition of the Willing’ must have a rolled their collective eyes, particularly when the US leader went on to say, “European leaders must place economic pressure on China for funding Russia’s war efforts”, according to Reuters. 

Yet, and while Trump’s moan is born out of frustration in the conflict impasse at the far-reaches of Eastern Europe, with Hungary, Slovenia and Slovakia aside, he is in current times factually wrong on how Europe as a bloc is a destination for large amounts of Russian oils; his criticism in some ways does have historical merit. Europe, until the Ukraine invasion, had gorged itself on cheap Russian energy, and because of it, the costings in industry were more than competitive. By taking away that source of economic bedrock, the papered over problematic cracks in industrial manufacturing and beyond, suddenly made themselves known. The last two or three years of economic malaise in the Old Continent is directly attributable to weaning itself from Russian sourced fuels. This is particularly true of its main powerhouse Germany. Its dogged bureaucratic rule adherence, unmalleable workforce and lack of investment in new technologies might have still found a few more years of grace if not for the fallout from Russia’s illegal invasion. Berlin, among all the other European seats of power (and this is where Trump should be offered sympathy) took an inordinate amount of time to find other sources of energy and considering the high prices oil, gas and electricity made during the early throes of the war, the amount Europe paid to Russia was indeed a boon for war funding. 

Mr Trump does seem to be making more appearances on his Ukraine war soap box. His own perception of a relationship with Vladimir Putin has been very much shaken. The Commander-in-Chief is publicly anti-war, and as he rightly points out he inherited two of the nastiest in recent times. However, he is dealing with the personal intransigents of Putin and Netanyahu and historical considerations that go beyond modern comprehension. Staying with the Ukraine war, Israel is a whole different can of geography and religious confrontation worms, rather than a land grab, the US leader does seem to have been inspired by the love-in witnessed in Beijing between Xi Jinping, Vladamir Putin and Kim Jong-un. “May President Xi and the wonderful people of China have a great and lasting day of celebration,” Trump posted on Truth Social. “Please give my warmest regards to Vladimir Putin, and Kim Jong-un, as you conspire against the United States of America.” Such language on social media indicates Washington feels the approach of an inflection point, and one that cannot be ignored. The threat of sanctions and wider secondary tariffs are diluted by Trump's tendency to only implement trade and punitive policy when it gets to a point of bluff being called. But he is up against international relationship professionals, those that are becoming increasingly immune to threats with long-dated timescales. The risk is that the most powerful man in the world would be as the metaphorical schoolboy, nose pressed up against the window, wishing he was in the groovy gang. Decisive action in whatever form is now needed to curb Russia’s goals in Ukraine, or a peace deal and a goodly chunk of Volodymyr Zelensky's country can be kissed goodbye. Europe is governed by weakness, it is time for Donald Trump to lead in strength and certainty, something our market, and reflective of the dithering over Russia, currently lacks.

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