Oil Prices Rebound After Two Straight Days of Losses Amid Demand Concerns

The Minutes from the December FOMC meeting showed that Fed members observed that a slowing of interest rate increases would allow the central bank to assess the progress on inflation and employment. Recall that the FOMC slowed the pace of interest rates increases to 50bps from 75bps the prior four meetings. However, that didn't mean they were happy with the current situation. Members are still worried about the risk of persistent inflation. Powell mentioned in his press conference that they "welcome the reduction in the monthly pace of price increase, but it will take substantially more evidence to give confidence that inflation is on a sustained downward path." In addition, the Summary of Economic Projections showed that no one expects rate cuts in 2023, as the median forecast for rates increased from 4.6% to 5.1%. As a result, participants felt that ongoing rate increases are "likely appropriate". The committee also noted the need for flexibility and optionality in policy decisions and that unwarranted easing in financial conditions could complicate their effort to restore price stability.

The US Dollar Index barely moved on the release of the Minutes, remaining within a range between 104.24 and 104.31.

However, stock traders noticed the hawkishness that the message conveyed, and the NASDAQ 100 sold off nearly 1% within the first 30 minutes of the release.

On a 240-minute timeframe, the NASDAQ 100 has been rangebound since mid-September, trading between the lows of October 13th and the 50% retracement from the highs of August 16th to the lows of October 13th, at 10440.64 and 12080.78 respectively. The hawkish Fed Minutes confirm the outcome of the meeting on December 15th, 2022. If the index continues to move lower, the first support is at the lows of December 28th at 10671. Below there, price can fall to the October 13th lows at 10440, then horizontal support dating to July 2020 at 9736.57. However, if the markets dismiss the hawkishness of the Minutes as "old news", the NASDAQ 100 could catch a bid. First resistance is at the gap opening from December 22nd, 2022, at 11114.23, then the gap fill from the prior day at 11207.38. Above there, price can move to the gap opening from the highs of December 15th, 2022, at 11591.33.

Despite the hawkishness of the FOMC Minutes, the US Dollar barely budged. However, stock markets sold off, with the NASDAQ 100 falling nearly 1% on the release. Will the downtrend continue, or will the index move towards the gaps above? It may depend on the Non-Farm Payrolls report on Friday!

Vietnam's economy was one of the best performing in Southeast Asia last year, but fears of a global recession weigh on the export-dependent nation.

The country's economy rebounded in 2022, as it recovered from the impact of the COVID-19 pandemic.

Its gross domestic product (GDP) surpassed targets and grew by 8.02 per cent, driven by exports and domestic consumption, marking the fastest pace of growth in 25 years.

Strong export performance and the recovery of domestic tourism have also contributed to Vietnam's economic growth in 2022, economists said. The numbers, however, conceal downside risks that could curtail growth this year, making life uncertain for the masses.

Some are already feeling the pinch.

Ms Bui Thi Tien, a migrant worker in Ho Chi Minh City, lost her job nearly two months ago.

She is among about half a million workers who have been laid off or seen their working hours slashed in the fourth quarter of 2022, due to softening global demand for Vietnam's exports.

"Without work, I don't have enough money to buy milk for my daughter. My husband works at a factory. He makes US$380 per month, but the income is not enough for food and rent for the whole family," she told CNA.

Finding a new job this year could prove challenging for those like Ms Tien, as experts expect demand for Vietnam's exports to slow significantly.

This comes amid major markets like the United States and Europe being hit by a cost-of-living crisis, fuelled by Russia's invasion of Ukraine.

There are also fears that China's reopening, while presenting growth opportunities, could further drive-up energy and commodity prices.

Vietnam's central bank said it will prioritise policies related to the valuation of its currency to support exports and meet the economy's credit demand.

"Our biggest political duty is to control inflation, which is set by the National Assembly at around 4.5 percent for 2023. Monetary policies aim to support further economic growth," said Mr. Dao Minh Tu, deputy governor of the Vietnam State Bank.

According to the Standard Chartered Wealth Expectancy 2022 report, which examines shifts in decisions among emerging affluent, affluent and high net worth investors, 36 percent of Vietnamese investors cited inflation as their top concern.

But cushioning Vietnam's economy from an unfavourable environment may be easier said than done.

Mr. Cuong Minh Nguyen, principal country economist at the Vietnam Resident Mission of the Asian Development Bank, said that external headwinds will further expose internal structural problems of Vietnam's economy.

"We also see a structural problem with all of the regulations, the regulatory framework of Vietnam, especially related to the disbursement of public investment," he said.

Vietnam plans to focus on public investment in major infrastructural projects to boost growth.

But this could be stymied by red tape, bottlenecks, as well as an ongoing anti-corruption crackdown that limits Vietnam's ability to disburse public funding.

"It's not just the question of how fast Vietnam can facilitate public investment, but the question is also how much Vietnam can spend and disburse the investment," Mr. Cuong said.

He also pointed to other challenges facing Vietnam's economy such as overreliance of the capital market on the banking sector, growing number of non-performing loans.

However, there is hope still, with experts saying that Vietnam might be spurred to speed up long-delayed structural reforms that would set further foundations for a market economy that further promotes the private sector for future economic expansion.

The weak start to the New Year has continued for oil. ICE Brent fell by a further 5.19% yesterday, which left the market trading convincingly below US$80/bbl. Time spreads have also weakened along with the flat price. The prompt ICE Brent spread has slipped back into a contango, after trading stronger over much of the second half of December. Chinese Covid infections are a concern for demand in the immediate term, however, the medium to long-term outlook is more constructive following the change in China's covid policy.

The oil market is looking better supplied in the near term and risks are likely skewed to the downside. However, our oil balance starts to show a tightening in the market from the second quarter through to the end of the year, which suggests that we should see stronger prices from 2Q23 onwards.

API numbers released overnight show that US crude oil inventories increased by 3.3MMbbls over the last week. Part of the build would have likely been driven by refinery shutdowns along the US Gulf Coast as a result of the extremely cold conditions seen in December. For refined products, gasoline stocks increased by 1.2MMbbls, whilst distillate stocks fell by 2.4MMbbls.

European natural gas prices have also continued their slide. TTF declined by around 10% yesterday, leaving the market at a little over EUR65/MWh- the lowest level since 2021. Mild weather has meant that storage is still looking very comfortable in the middle of winter and milder weather is expected to continue for a while longer. Interestingly, Europe is no longer trading at a premium to spot Asian LNG. In fact, Asia is trading at a premium of more than US$9/MMBtu to TTF, which suggests that we could start to see more LNG cargoes diverted towards Asia at the expense of Europe.

Demand for industrial metals is being hit by surging coronavirus infections in China following an abrupt exit from Beijing's zero-Covid policy. Any gains are likely to be capped as Lunar New Year approaches. LME copper 3M prices traded below $8,300/t while nickel prices fell by more than 4% on the day and led the declines amongst base metals yesterday.

The latest data from LME shows exchange inventories for zinc falling for a ninth consecutive day by 1.6kt to 30.5kt (the lowest level since 1989), whilst lead on-warrant stocks dropped to the lowest since 1997 as of yesterday.

Nexa Resources has halted production at its Atacocha San Gerardo open-pit zinc mine in Peru due to a road blockade by a local Machcan community. The zinc producer, controlled by Brazilian holding company Votorantim SA, said the obstruction of the road to the mine has not had a material impact on production to date. Atacocha accounts for less than 3% of the company's total zinc production.

Europe's gas prices are slumping as the combination of mild weather and reduced industrial consumption has produced an unusual seasonal increase in inventories which threatens to overwhelm the storage system.

Inventories in the European Union and the United Kingdom (EU28) are at the second-highest for the time of year in the last decade and on course to end the northern hemisphere winter at an exceptionally high level.

Plentiful inventories at the end of winter 2022/23 will reduce the amount of gas that needs to be put into storage this summer in preparation for winter 2023/24.

There will not be enough storage demand to absorb all the excess production over the summer months if prices remain at high levels.

Left unchecked, prices would fall sharply over summer to encourage more consumption, discourage production and slow imports.

But the futures market is forward-looking and prices are already falling to reduce the pace of inventory accumulation and preserve space for stocks to be added this summer.

Some policymakers have continued to call for intense gas and electricity conservation to secure supplies for winter 2023/24.

But Europe's storage is designed to cope with seasonal swings in consumption; it is not a strategic stockpile to cope with embargoes or blockades.

EU28 gas storage is very different from the U.S. Strategic Petroleum Reserve and emergency petroleum stockpiles maintained in other countries.

Given finite capacity in the gas storage system, there is a limit to how much conservation in winter 2022/23 can improve supply security in winter 2023/24.

Slumping gas prices imply the limit is close to being reached.

EU28 inventories rose by 9 terawatt-hours (TWh) between Dec. 23 and Jan. 2 compared with an average seasonal depletion of 26 TWh in the same period over the previous 10 years.

Stocks are now 218 TWh (+30% or +1.98 standard deviations) above the prior 10-year seasonal average up from a surplus of 92 TWh (+10% or +0.86 standard deviations) when the winter season started on October 1.

Inventories are on course to fall to around 562 TWh before the end of winter, with a likely range of 435 TWh to 743 TWh, based on seasonal movements over the past 10 years.

This would still be the second-highest winter-end stock in the past 10 years (stocks ended winter 2019/20 at 609 TWh) and far above the average of 345 TWh.

Moreover, the storage surplus has been increasing, not reducing, this winter, as high prices, industrial shutdowns and warmer than average temperatures have curbed consumption and attracted record LNG inflows.

Total storage capacity is only 1,129 TWh so the system is on track to end winter 50% full (with a probable range of 39% to 66%).

This would not leave much volume for additional gas to be added during the low-consumption refill season from April to September.

The current inventory trajectory is unsustainable.

Traders no longer anticipate inventories might fall critically low before winter ends. Instead, prices are falling to encourage more consumption and redirect LNG to more price-sensitive buyers in South and East Asia.

Futures prices for gas delivered at the end of winter in March 2023 have slumped to 68 euros per megawatt-hour (MWh) from 135 euros on Dec. 15 and 194 euros at the start of winter on October 1.

The end-of-winter calendar spread between March and April 2023 has fallen into a contango of more than one euro from a backwardation of one euro on Dec. 15 and almost 10 euros at the start of the winter season.

Policymakers have criticised very high prices for gas that prevailed for much of 2022 following Russia's invasion of Ukraine.

But high prices forced reductions in consumption and maximised LNG imports, removing the threat gas supplies would run out in winter 2022/23.

Europe's gas market worked.

Now the focus has turned to ensuring a smooth transition of prices and stocks ahead of winter 2023/24.

FTX's former top lawyer Daniel Friedberg has cooperated with U.S. prosecutors as they investigate the crypto firm's collapse, a source familiar with the matter said, adding pressure on founder Sam Bankman-Fried who was arrested on criminal fraud charges last month.

Friedberg gave details about FTX in a Nov. 22 meeting with two dozen investigators, the person said. The meeting, held at the U.S. Attorney for the Southern District of New York's office included officials from the Justice Department, Federal Bureau of Investigation, and the U.S. Securities and Exchange Commission, the source said. Emails between attendees scheduling the meeting with those agencies were seen by Reuters.

At the meeting, he told prosecutors what he knew of Bankman-Fried's use of customer funds to finance his business empire, the source said. Friedberg recounted conversations he had with other top executives on the subject and provided details of how Bankman-Fried's hedge fund Alameda Research functioned, the source said.

Friedberg's cooperation has not been previously reported. He has not been charged and has not been told he is under criminal investigation, the source said. Instead, he expects to be called as a government witness in Bankman-Fried's October trial, the person said.

Friedberg's lawyer, Telemachus Kasulis, the FBI and FTX did not respond to requests for comment on his cooperation. The SEC, the Department of Justice and Bankman-Fried's spokesman declined to comment.

Bankman-Fried is accused of diverting billions of dollars in FTX client funds to Alameda to bankroll venture investments, luxury real estate purchases, and political donations. On Tuesday, he pleaded not guilty in Manhattan federal court.

Manhattan U.S. Attorney Damian Williams, who is leading the criminal case against now bankrupt FTX, said last month: "If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it."

Two of Bankman-Fried's closest associates, Caroline Ellison, Alameda's former chief executive, and Gary Wang, FTX's former chief technology officer, pleaded guilty to fraud and agreed to cooperate. A lawyer for Ellison didn't respond to a request for comment. Wang's lawyer declined to comment.

FTX filed for bankruptcy protection on Nov. 11. A few days later, on Nov. 14, Friedberg received a call from two FBI agents based in New York. He told them he was willing to share information but needed to ask FTX to waive his attorney-client privilege, according to a person familiar with the matter and emails viewed by Reuters.

Friedberg wrote to FTX the next day asking the company to waive his privilege so he could cooperate with prosecutors, according to the email seen by Reuters. FTX did not do so, but agreed with Friedberg on the points he could disclose to investigators, the person said.

Friedberg then wrote back to the two FBI agents, telling them in an email reviewed by Reuters: "I want to cooperate in all respects."

The U.S. Attorney's Office set up a meeting where Friedberg signed so-called proffer letters prepared for him by the SEC and other agencies, according to the source and an email exchanged by participants. Proffer letters typically describe a potential agreement between authorities and individuals who are witnesses or subjects of an investigation.

Prior to his work advising FTX, Friedberg advised a mix of banking, fintech, and online gaming companies.

One of his previous employers, a Canadian online gaming firm named Excapsa Software, where he was general counsel, also drew controversy due to a cheating scandal involving a poker site it operated called Ultimate Bet. A Canadian gaming commission in 2008 fined Ultimate Bet $1.5 million for failing to enforce measures to prevent fraudulent activities. Excapsa has since dissolved.

According to an audio recording available on the website PokerNews, Friedberg and some other Ultimate Bet associates privately discussed that year how to handle the scandal and minimize the amount of refunds owed to players. Friedberg previously told NBC News that the audio was illegally recorded but NBC's article did not say that Friedberg challenged its authenticity.

Friedberg first represented Bankman-Fried in 2017 as outside counsel while at U.S. law firm Fenwick & West, where he chaired its payment systems group, the source familiar with the matter said. At the time, the source said Friedberg advised Bankman-Fried on running Alameda, which he founded that year.

In 2020, when Bankman-Fried launched a separate exchange for U.S. customers called FTX.US, Friedberg moved in-house as FTX's chief regulatory officer.

In a now-deleted blog post published that year on FTX's website, Bankman-Fried wrote that Friedberg was FTX's legal advisor "from the very beginning," noting he had been "with us through thick and thin."

Friedberg resigned from his position on Nov. 8, a day after Bankman-Fried disclosed to top executives that FTX was almost out of money, according to the source and three other people briefed on the talks, along with text messages his legal team exchanged at the time.