OPEC Oil Production Fell Short Of OPEC+ Target In May

Commodity

Economic

Summary:

OPEC’s crude oil production in May increased less than called for in the OPEC+ agreement which had a large output hike planned for last month.

OPEC Oil Production Fell Short Of OPEC+ Target In May_1

OPEC’s crude oil production in May increased less than called for in the OPEC+ agreement which had a large output hike planned for last month.

All 12 OPEC members produced 26.75 million barrels per day (bpd) in May, up by 150,000 bpd from April, a Reuters survey showed on Monday.

The five OPEC members that have pledged cuts in the OPEC+ agreement and are now gradually unwinding these cuts had to raise their combined output by 310,000 bpd. But they only lifted production by 180,000 bpd, according to the Reuters survey of data from oil-flow tracking companies and sources at OPEC, oil firms, and consultants.

That’s because Iraq made cuts to compensate for previously chronic overproduction and Saudi Arabia and the United Arab Emirates (UAE) raised output by less than their targets, the Reuters survey found.

Saudi Arabia made the largest hike in May compared to April. OPEC’s top producer and de facto leader, and leader of the OPEC+ alliance, raised output by 130,000 bpd, per the survey.

That’s not unusual as Saudi Arabia had the largest share of cuts.

OPEC+ producers who have made cuts in the previous three years are now unwinding these at a pace of 411,000 bpd in May, June, and July.

The OPEC+ group earlier this month decided it would boost July production by another 411,000 bpd, citing “current healthy oil market fundamentals and steady global economic outlook.”

In a note on Monday, commodity analysts from Morgan Stanley said the 411,000 barrels daily that OPEC+ said it would add to oil production in May did not materialize.

“Notwithstanding the around 1 million-barrel-a-day increase in production quotas between March and June, an actual increase in production is hard to detect,” the team, led by Martijn Rats said in the note, as quoted by Bloomberg.

“Notably, it does not appear that production in Saudi Arabia has ramped up significantly,” according to Morgan Stanley.

Still, the bank believes that OPEC+ would add some 420,000 bpd to its crude production between June and September, tipping the market into a surplus.

Source: Zero Hedge

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Devin

Economic

U.S. seaborne imports of goods from China dropped 28.5% year-over-year in May, the sharpest decline since the pandemic, as President Donald Trump's 145% tariffs took hold, supply chain technology provider Descartes said on Monday.

China is the top U.S. supplier of goods that enter through seaports, including the nation's busiest in Los Angeles/Long Beach. Domestic businesses ranging from retailer Walmart to automaker Ford depend on those goods to operate.

Ports on the U.S. West Coast handle the greatest share of trade with China and experienced significant volume declines in May with Los Angeles, Long Beach and Tacoma, Washington, down 18.4%, 22.4% and 25.6%, respectively, Descartes data showed.

Overall U.S. seaborne imports in May tumbled 7.2% from the year earlier to 2.18 million 20-foot equivalent units - snapping a streak of near-record increases fueled by companies frontloading goods to avoid higher duties.

The United States and China agreed to a 90-day pause on punitive tit-for-tat tariffs last month. U.S. and Chinese officials met in London on Monday to defuse the high-stakes trade dispute between the world's largest economies.

Port executives and shipping consultants expect volume from China to rebound during the tariff truce, albeit at a more moderate level.

Source: Yahoo Finance

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Adam

Commodity

The sudden buying demand in the crude futures market has the potential to lead to a short-term rally in oil prices if CTAs rush to short covering.

Last week, oil prices lodged another weekly gain, despite the announcement from OPEC+ that the group would continue to boost production in July with another 411,000-barrels-per-day hike.

Geopolitical events and the U.S. jobs report on Friday boosted prices, while wildfires in Canada continued to provide support.

Speculators raised their net long position in oil futures, with buying dominated by fresh buying in NYMEX WTI futures, ING's commodities strategists Warren Patterson and Ewa Manthey said on Monday.

Early on Monday, oil prices were up by about 0.5%, with Brent above $66 and WTI rising to $64.85 per barrel.

“The US market has been more constructive recently, which is also reflected in the narrowing of West Texas Intermediate’s (WTI) discount to Brent,” ING’s strategists said today.

Renewed U.S.-China trade talks also supported oil prices.

Last week, HSBC said its forecast that Brent Crude prices would remain around $65 per barrel later this year could be too optimistic as OPEC+ continues to raise production, which will result in a bigger-than-expected surplus after the summer ends.

Currently, the market is fairly balanced, and peak summer demand will support the large OPEC+ increases already announced for June and July. But the hikes after the third quarter – when peak demand season would have ended – will raise the surplus on the market to higher than previously expected levels, HSBC said.

Banks have divergent opinions about whether OPEC+ will proceed with easing the cuts.

Goldman Sachs, for example, expects OPEC+ to make its final production hike in August at the now-standard level of 411,000 barrels daily.

Source: oilprice

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Adam

Economic

Industry groups representing sectors including real estate, finance and multinational companies are pushing for the reduction or exclusion of a retaliatory tax targeting foreign investors in the U.S. in the Republican tax bill, as they see it as a threat to their businesses and to the broader markets and economy.

The proposed tax, known as Section 899, applies a progressive tax burden of up to 20% on foreign investors' U.S. income as pushback against countries that impose taxes the U.S. considers unfair, such as digital service taxes. It could raise $116 billion in taxes over 10 years.

Some individual companies are also pushing for action, according to two lawyers familiar with their clients' plans, who did not name specific companies due to client confidentiality.

“Lobbying surrounding Section 899 is at peak levels,” said Jeff Paravano, a former Treasury Department official who is now chair of law firm BakerHostetler’s tax group.

The move comes as Senate Finance Committee Chairman Mike Crapo, the Republican in charge of the chamber's tax writing provisions, and other Republicans are in close coordination with President Donald Trump on the tax bill, having met on Wednesday.

The White House declined to comment. Crapo said he would not comment on ongoing discussions about the bill.

Global investors hold almost $40 trillion in U.S. assets, such as securities, loans and deposits, according to the U.S. Treasury International Capital Reporting System. This raises concerns about the ripple impact of the bill.

"It has the potential to be a very negative impact on the free flow of capital from the U.S. and through businesses that are multinational," said Gabriel Grossman, a U.S. tax partner at Linklaters, adding he has seen some clients put planned investments in the U.S. on pause until they have more clarity on the new levies.

The broader bill itself is also creating much debate as it is forecast to add about $2.4 trillion to the U.S. debt and has sparked an explosive feud between Trump and his erstwhile key ally Elon Musk, the billionaire CEO of Tesla.

COLLATERAL DAMAGE

Industries across different sectors are on high alert.

The new levy could increase taxes from rents and real estate investment trusts, gains from property sales and securitized products.

"There is a legitimate fear among investors that, if this goes through, it could impact investments, and that it would create higher costs for real estate in terms of getting financing," said David McCarthy, managing director at the CRE Finance Council, a nonpartisan trade group. "It could depress the value of real estate if you don't have as much money to finance property purchases."

The asset management industry is concerned about outflows.

"We encourage the Senate to make this provision more targeted to respond to unfair foreign taxes and other concerning measures rather than disincentivizing beneficial foreign investment in the U.S.," a spokesperson for the Investment Company Institute said.

The investment community is also working to clarify whether Treasuries and corporate bonds will remain exempt as they are currently subject to a portfolio interest exception that applies no taxation, lawyers and industry sources said.

"There's reason to believe that fixed-income assets wouldn't be in scope, but there's still considerable uncertainty about this point," Morgan Stanley strategist Michael Zezas said in a note to clients.

A footnote part of the Budget Committee report, which provides direction to taxpayers, courts and the Treasury in interpreting the statute, says that Section 899 "does not apply to portfolio interest."

Foreigners' equity investments, however, do not count with the portfolio interest protection and could be taxed, lawyers and banks said.

MULTINATIONALS

Multinational companies could face a new tax burden on dividends and inter-company loans, potentially reducing profit, according to Section 899.

Jonathan Samford, president of the Global Business Alliance, a lobbying group for international companies in the U.S., said many multinationals could decide to shut down operations in the U.S., risking 8.4 million jobs in the country.

"Those companies will not be paying U.S. tax whatsoever because they will not be able to operate in that punitive, high-tax environment," he said.

Morgan Stanley said in a note to clients a repatriation of profits out of the U.S. and pressure on the U.S. dollar.

Corporate loans could also become more expensive, as loans extended by foreign banks might be subject to the new tax burden if section 899 overrides current treaties, lawyers said, adding that companies could end up paying more for the debt to make up for the tax increase.

SENATE PASSAGE

Investors are hoping for some changes in the Senate.

Senator Steve Daines, a Montana Republican on the Finance Committee, said it may be necessary to clarify the language in Section 899.

“We want to make sure we don't have tax policies that in some way would diminish the fact that we are the gold standard in the world,” Daines said.

Morgan Stanley said in a note that it expects "sufficient Senate Republicans to take notice and clarify the policy to mitigate this risk" of increasing the cost of capital for the U.S.

"It actually is pretty much of a nuclear bomb," said Pascal Saint-Amans, partner at Brunswick Group, who is also the former tax chief of the Organization for Economic Cooperation and Development, who led the 2021 global tax treaty. "The coverage (of Section 899) seems extremely broad and the terms are not extremely well-defined."

source :Reuters

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Daniel Carter

Political

Canada will reach NATO's 2% defense spending target by the end of this fiscal year, Prime Minister Mark Carney announced Monday in a major shift that aims to reassert the country's role within the alliance and respond to heightened global security threats. The commitment marks Canada's largest increase in military outlays since World War II and comes nearly a decade ahead of the previous government's 2032 timeline for hitting that threshold.

The policy was unveiled during Carney's keynote at the University of Toronto's Munk School of Global Affairs, where he cast a sober assessment of the evolving global order. “We stood shoulder to shoulder with the Americans throughout the Cold War and in the decades that followed, as the United States played a dominant role on the world stage. Today, that dominance is a thing of the past,” Carney said.

The plan, estimated to require $18 billion to $20 billion in new investment, includes accelerated procurement of submarines, drones, ships, armored vehicles and Arctic surveillance tools. Also on the docket: boosting pay for military personnel, expanding health care infrastructure, and improving services for military families.

Strategically, the spending is not only geared toward achieving NATO's 2% guidance but is also designed to position Canada for proposed future targets as high as 3.5%, a scenario being discussed ahead of NATO's June summit in The Hague. Carney emphasized the broader context, stating, “Rising great powers are now in strategic competition with America. A new imperialism threatens.”

Recent NATO data pegged Canada's military outlays at just 1.45% of GDP for 2024, the fifth consecutive year the country fell below the alliance goal. Allies, particularly the U.S., have long criticized Canada for under-investing; calls for increased contributions intensified during Donald Trump's presidency, with added pressure on NATO members to match U.S. capabilities.

Carney's remarks framed the spending not as deference to external leverage but as a response to generational geopolitical change. “Our goal is to protect Canadians, not to satisfy NATO accountants,” he said, while highlighting the opportunity to transform Canada's economy through defense modernization and industrial investment.

In alignment with NATO's defense industrial pledge, Ottawa will commit to developing a strengthened domestic defense manufacturing base and investing in advanced technology across cyber, AI, quantum computing and space domains. These efforts aim to curb Canada's reliance on foreign suppliers and close longstanding capability gaps.

The dramatic shift in posture contrasts sharply with the policy of former Prime Minister Justin Trudeau, who as recently as 2023 downplayed the 2% target as a “crass mathematical calculation.” Carney, by contrast, called the present moment a “hinge moment” for Canada, underscoring a pivot not only in defense strategy but in foreign policy orientation.

Source: Investing

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Thomas

Economic

The stock market is now faster and more aggressive than ever before, which is both good and bad. Because there are now more participants than in previous years and decades, every move and situation is assimilated faster due to the sheer volume of capital and information distribution, leading to opportunities and risks that weren’t present for the previous generation of traders and investors.

Spotting some of these dangers is key for these investors to avoid unnecessary losses and setbacks in their portfolios and wealth creation.

Today’s market activity has created a warning that no one with any kind of exposure to financial markets should ignore. This reasoning is connected to fundamentals and expected behavior in a risk-off environment.

For this to work, investors will have to understand how to connect the dots between the price action in the iShares 20+ Year Treasury Bond (NASDAQ:TLT) ETF and other asset classes that are considered “safe” or attractive for institutional investors when the risks in the future stack up to be too high, such as the SPDR Gold Shares (NYSE:GLD) in the commodities space.

As investors will see, both of these names are now creating a significant headwind for the SPDR S&P 500 ETF Trust.

What Bonds Represent: The Most Important Indicator

One of the most important drivers of any economy is money itself, its excess or lack thereof, its expensiveness or cheapness. When it comes to bonds, investors have access to a live quote of the current market value through the yield these instruments offer.

Looking at the price action in the iShares 20+ Year Treasury Bond ETF, investors can note a decline of 7.4% over the past 12 months, underperforming the S&P 500 index significantly, but that’s not the most important thing. Bond prices move inversely to their yields. Therefore, this ETF yields up to 4.4%, and here’s what that means.

This yield is a proxy for the cost of money today and, therefore, a proxy for how hard it can be for businesses to deliver on future growth. This yield tells everyone that money has become significantly more expensive than it was just three years ago.

The fact that money is now more expensive has had an impact on the American consumer, as companies in the consumer discretionary sector have already shown signs of weakness, as consumers now see their budgets tightening and credit becoming less accessible.

Recent examples are Lululemon Athletica (NASDAQ:LULU) Inc. and The Gap Inc (NYSE:GAP)., stocks that have dropped by double-digit percentage points during their latest quarterly earnings reports.

Gold’s Performance Signals Appetite For Safety

Historically, gold has been regarded as the best inflation and volatility hedge in the markets due to its limited supply, which not only helps mitigate the printing of fiat currency but also provides a more straightforward pricing mechanism during volatile markets like today’s.

With ongoing trade tariff negotiations between the United States and other nations, investors perceive too much risk in American bonds and currency, and the same applies to other international assets as well. Therefore, the only sensible approach is to go “risk off” and invest in a commodity like gold.

That theme might explain the 42% rally that the SPDR Gold Shares gold ETF has delivered in just 12 months, signaling an apparent rotation and preference for the benefits that gold can offer during volatile and uncertain markets, such as the one most are experiencing today.

Of course, all of this behavior, in bonds and gold, will eventually affect the S&P 500 and its current valuation.

It All Comes Down to Stocks

Understanding that more expensive money, as seen in bonds, will likely become a headwind in future earnings, valuations in the S&P 500 would have to be adjusted inevitably to reflect this fact. Knowing that this fact occurs in every cycle, investors have been flocking to gold instead, but here’s what really matters.

During the so-called “Liberation Day” of April 2025, when President Trump announced the tariffs to be implemented in the economy, the S&P 500 breached a 20% decline from its 52-week high, throwing it into an official bear market.

Since then, the price has recovered in record time.

However, price, along with volume, has now stalled just shy of its all-time high, meaning that confidence and momentum have not been enough to finalize this upside move. This effectively reflects the recent price action in gold driven by fears caused by bonds.

Source: Investing

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Adam

Stocks

Nvidia (NVDA) rose Monday amid trade talks between the U.S. and China taking place in London on Monday.

Investors sent shares rising even in the face of news that China exports to the U.S. plunged 35% in May. Is Nvidia stock a buy or a sell now?

Treasury Secretary Scott Bessent and other top Trump administration officials were set to meet. Monday. That follows President Donald Trump's call with President Xi Jinping on Thursday.

Earlier, Trump accused China of violating the two nations' trade truce, set in place on May 12. Though Trump did not mention any specific sector, reports said China's slow approval for rare earth minerals may be causing the friction. China responded citing its concerns over U.S. export control guidelines for artificial intelligence chips and chip design software among others.

Trade developments have been in focus with recent court decisions about the Trump administration's global import tariffs swinging back and forth. A U.S. appeals court on Thursday temporarily reinstated levies in response to the U.S. Court of International Trade's decision that President Donald Trump had exceeded his authority to impose reciprocal tariffs under the International Emergency Economic Powers Act of 1977.

Meanwhile, analysts at Jefferies recently noted that capital expenditures among Chinese AI plays Baidu (BIDU), Alibaba (BABA) and Tencent (TCEHY) was up 100% from the prior year.

Broadcom last week said its partners were "doubling down on inference" with big investment plans. Broadcom competes with Nvidia for some chips but the surging overall demand trumped the rivalry between the two biggest AI chip leaders.

In other recent moves, Barron's reported that Nvidia's Chief Executive Jensen Huang is set to sell more than $800 million in Nvidia stock through planned transactions.

Nvidia in late May said first-quarter earnings per share of 81 cents rose 33% from the same quarter a year ago. Sales grew 69% to $44.1 billion. Analysts polled by FactSet had projected 88 cents in earnings per share on sales of $43.2 billion.

Focus on China H20 chips

Nvidia is working on a new China chip, according to reports.

Huang told CNBC in early May that being blocked from the Chinese market would be a "tremendous loss" for Nvidia. He expects China's burgeoning AI market to reach $50 billion in two to three years.

Nvidia had written off $5.5 billion after the Trump administration said the company would need a license to sell its H20 chips abroad. Analysts believe the company may not be granted the license.

Huang this month said Nvidia's system would be open to other AI chipmakers to integrate their custom chips around its standard rack design for data centers.

U.S.-China Trade Deal

A recent deal between the U.S. and China to temporarily slash tariff rates on each other boosted Nvidia shares. Another factor driving optimism was the Trump administration's rescinding of a so-called AI diffusion rule related to export controls on advanced AI chips, a rule put in place by the Biden administration.

Nvidia expects to write off another $8 billion from the H20 chip ban in the current quarter, and predicts $45 billion in sales. The stock also rose on news it will supply its artificial intelligence chips to Saudi Arabian AI company Humain.

Meanwhile, on IBD MarketSurge, Investor's Business Daily's premium stock research platform, one chart feature turned bullish. Although the 200-day moving average has crossed above the 50-day moving average in what is known as a "death cross," the 50-day moving average is beginning to slope upward for the first time this year. The move is bullish for chart setups.

Big Tech Confirms Huge Spending Plans

Nvidia stock had risen above the 50-day moving average after Amazon (AMZN) earnings released May 1. Amazon's run-up in capital expenditures in the first quarter was largely due to demand for its artificial intelligence services.

Amazon's capex for the first quarter jumped to $24.3 billion from $13.9 billion in the same quarter a year ago.

Magnificent Seven leaders Meta (META) and Microsoft (MSFT) recently reported quarterly results that beat estimates. Meta increased its capital expenditure for 2025 to support its "artificial intelligence efforts."

Alphabet (GOOGL), an Nvidia partner, crushed estimates and maintained its $75 billion capital spending plan.

But Nvidia stock in late April was given a sell rating at Seaport Research as it initiated coverage with a $100 price target. Analysts see "significant complexity required for deployments of Nvidia systems in comparison to traditional data centers." They also see the artificial intelligence spending boom slowing in 2026.

Nvidia stock had declined following news that China's Huawei Technologies is testing a new artificial intelligence chip that could have higher capabilities than Nvidia's H100.

Nvidia Stock: Volatility Amid Tariff Risk

A flurry of tariff news spurred volatility in Nvidia stock in April. Nvidia stock surged amid a historic rally when Trump announced a 90-day tariff pause for most countries. But Trump followed that up by increasing tariffs on China to 125% after that nation imposed tariffs of 84%.

Trump exempted semiconductor products from those steep tariffs. On Truth Social, however, he mentioned that nobody was getting "off the hook." U.S. Commerce Secretary Howard Lutnick said sector tariffs on semiconductor imports would land in about a month.

Meanwhile, Nvidia had announced plans to make AI supercomputers entirely in the U.S. The company's blog says it has "commissioned more than a million square feet of manufacturing space to build and test Nvidia Blackwell chips in Arizona and AI supercomputers in Texas." Mass production is expected to ramp up in 12 to 15 months.

The Trump administration added several Chinese companies to an export blacklist on national security concerns. U.S. companies selling chips to those firms will need to get government approval first.

Won't Hurt 'In Short Term'

At the GTC conference in March, Nvidia Chief Executive Jensen Huang noted that tariffs would not hurt the company "in the short term" as it seeks to move more chip production to the U.S.

In terms of its 12-month price performance, Nvidia has outperformed 87% of all other stocks in Investor's Business Daily's database.

Funds own 40% of Nvidia's outstanding shares, according to IBD MarketSurge. Going by its Accumulation/Distribution Rating of C, it would seem that funds are neutral. The rating measures price and volume action over the last 13 weeks.

Big Techs Confirm Huge Spending Plans

Earlier this year, Amazon indicated it planned to increase its spending by 27% or $105 billion – mostly on AI data centers. But that was topped by Alphabet which plans to increase its spending by 57% for a total of $75 billion.

"Most AI (computing) has been driven by Nvidia chips, and we obviously have a deep partnership with Nvidia and will for as long as we can see into the future," Amazon CEO Andy Jassy said on its fourth-quarter earnings call in February.

However, Microsoft's spending on AI data centers is set to slow next year. Microsoft announced in December that the company faced no chip supply constraints.

Nvidia Stock: Market Cap

Nvidia replaced Intel (INTC) in the Dow Jones Industrial Average in November, becoming the fourth Magnificent Seven stock to join the list of blue chips. The others are Apple, Amazon.com (AMZN) and Microsoft (MSFT).

The stock has also moved ahead of tech titan Apple (AAPL) in terms of market cap.

The AI chip behemoth has top-level Earnings Per Share Rating of 99. Further, the stock's all-around strength, or Composite Rating, sits at 97.

IPhone Moment Of AI

Nvidia's graphics processing units help accelerate computing in data centers and AI applications.

The company pioneered graphics processors used in such industries as health care, game machines, automobiles and robotics.

In March 2023, generative AI took a leap forward with OpenAI's ChatGPT. According to CEO Huang, Nvidia's AI-capable chips paved the way for the "iPhone moment of AI."

That helped Nvidia turn the tide on its results. It had reported three quarters of declining year-over-year sales. It also showed four quarters of tapering earnings in late 2022 and early 2023.

But then the company achieved record top- and bottom-line growth in the seven most recent quarters.