Last week was something of topsy turvy one. Eventually, and unlike the wider suite, the oil market was not able to extract itself from being besotted by the Middle East, at times pushed on by the hope in equities, only to be finally sat down in an unchanged fashion by China. As much as the driver in oil prices at present comes from the United States, the short comings of the biggest importer of oil in the world dampens the outlook for demand. The House Price Index, Fixed Asset Investment, Industrial Production and Unemployment Rate failed to make expectation and although reaction took time to be reflected in prices, the weak Chinese data eventually smothered any upward momentum. For the front month in futures, WTI ended the week -$0.19/barrel (-0.25%), Brent +$0.02/barrel (+0.03%), Heating Oil -1.10c/gallon (-0.47%), RBOB -8.01c/gallon (-3.35%) and Gasoil -$1.75/tonne. The worrisome state of Chinese demand was one of the main takeaways from both the OPEC and IEA monthly reports and one in which they unusually found agreement, this was backed up a rapid fall in refinery processing due to poor fuel demand. It is interesting to note that the draw in Gasoline inventories in the weekly EIA statistics failed to stop RBOB being the worst performer in the oil futures complex and brings an argument that market participants are feeling time decay on the idea of a summer driving season and third quarter demand. As it is, refiner margin remains pressured by the high prices of US crudes. Lastly, with Iran failing so far to make good on its retaliatory promise of an attack on Israel and Hamas not turning up to a ceasefire meeting that bizarrely went ahead without them, the market reverted to concluding that as no barrels were being taken away from the market, the affected emotional rallies became unwarranted. 

This week the Jackson Hole Symposium will take centre stage as the grand and the good of central banking meet up and where the rest of us hunt for clues in signposting of forward thinking for economic strategies. The most important speech will obviously be from the Fed Chair Jerome Powell, which in this case does seem to have a greater degree of anticipation than usual. Until he speaks, the CME FedWatch tool has been a proxy to what the FED might or might not do. Because of the 'on call' readings of US PPI and CPI inflation and stellar Retail Sales, a rate cut is still fully price in for September, but a 50-basis points one has reduced to under 25% from the high of 55% as the FED decision is a tightrope of not strangling the economy or alternatively fuelling it. Adding a greater degree of spice is the political ramifications, the FED is independent and will not be moved by the Presidential wishes of the two runners, but whatever decision is made for ill or good will be seized upon by the candidates as to which will be best in running the economy. The Reserve Bank of New Zealand blinked last week and cut rates, how and if that is emulated is intriguing with the European Central Bank also having a very tough decision to make in September. European final CPI reading and Manufacturing PMIs this week might very well reveal the push and pull reasons for how the ECB attacks its decision on September 12. Finally, the Bank of China (PBOC) will decide on the one-year and five-year loan prime rates tomorrow, and if they are left alone as predicted, questions will yet again arise as to what can refire a light that disperses the current China gloom.

Oil will be a regular defendant in the courts of now, and the future

According to the National Oceanic Atmospheric Administration (NOAA), July 2024 was the warmest July on record for the globe in NOAA's 175-year record. The July global surface temperature was 1.21 degree Celsius (2.18 degrees Fahrenheit) above the 20th-century average of 15.8C (60.4F). The NOAA temperature map shows a snapshot of all continents affected in some way by higher temperatures. For the month of July, the Arctic had its third warmest temperature and sixth lowest ice extent; Europe its warmest January to July period on record; Asia, Africa and South America the same record for the seven-month period, with global ocean surface temperatures the second-highest recorded for July. This becomes even more interesting, or alarming depending on one’s point of view, to consider that every month for the past fifteen, has beaten its previous monthly record.

Meat and drink then for climate activists and those that are intent on pushing for atonement in what has started to become something of a retrospective blame game. Last week, another instance of increasing public challenges to big oil’s alleged involvement in climate change, a letter was handed to the US Department of Justice asking for a federal investigation into the oil industry’s climate crimes. The letter was organized by the environmental group Chesapeake Climate Action Network and consumer advocacy group Public Citizen, and according to the Guardian, is signed by 9,000 Americans whose loved ones have survived climate disasters and cites evidence that big oil has known for decades about the dangers of their products and has sought to cover up that evidence.

Data for Progress, the polling company which describes its mission as a progressive think tank, arming movements with the tools they need to fight for a more equitable future, carried out an intriguing study at the beginning of May. A survey of 1,206 U.S. likely voters nationally using web panel respondents were asked whether oil and gas companies ought to be legally accountable for any involvement in climate change. Arguably, respondents represented a fair take on the US populace with political allegiance, gender, education and ethnicity considered. The poll then has some authority, and the results were surprising as 62% agreed, 28% disagreed and 10% did not know.
As far back as 2015, InsideClimate News and the L.A. Times published internal papers from oil companies revealing that from 1970 executives were in full knowledge imparted from in-house scientists that oil-fuel products held a catastrophic threat to the climate. In 2021 there was an admission by oil executives of using shadow groups that questioned climate science and fought climate legislation. In May of this year, and after an appeal to a New York Federal judge, it was ruled that the case may be heard in state court in which the City of New York alleges that the defendants violated the Consumer Protection Law by misleading consumers about their products’ impact on climate and falsely representing that they are “environmentally responsible companies developing innovative green technologies and products.”

One need wonder if Kamala Harris’ run at the White House is successful, will cities and states be emboldened in bringing further actions? After all, the Vice President prides herself on a history of going after energy companies when in the role of Attorney General of California. Many of these court cases will take years, if not decades to find a ruling. Some are genuine and concerns valid. Some are opportunistic, possibly looking for a class action payout. For every sleight of hand shown by oil executives there are plenty from the guerillas that wish to push green agendas and alternative energies down our craws. However, such legal developments will not go away and while it is convenient for Big Tobacco’s villainy to be transposed onto Big Oil, the logic still stands that the world could have done without the herb Nicotiana for the last hundred years, it could have not done without oil. Lines will be drawn, screaming opposing views will scream, and oil will carry on being consumed until there is a viable, cheap alternative available to the masses and not just the elite.

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