David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Chevron-Booked Ship Laden With Venezuelan Crude Sails to US

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    The Aframax Sealeo is on its way to the US after receiving Venezuelan crude in a ship transfer off Aruba, according to ship-tracking data compiled by Bloomberg. 

    Sealeo received Hamaca crude oil from tanker Caribbean Voyager in a ship-to-ship transfer ~Monday

    Caribbean Voyager loaded ~500k bbl Hamaca ~Jan. 6 at the Venezuelan government-controlled port of Jose

    Sealeo signals Pascagoula, Mississippi, as destination; Pascagoula is the site of the Chevron Pascagoula refinery, a facility designed to process heavy sulfurous oil like the types produced by Venezuela

    Cargo is first to sail to US after the country eased sanctions against Venezuela in November

    Last time US received Venezuelan crude was in May 2019 when Motiva Port Arthur refinery in Texas took ~350k bbl of Diluted Crude Oil: AHOY data compiled by Bloomberg

    Other Chevron tankers sailing to/from Venezuela:

    Kerala, which loaded 250k-300k bbl Boscan crude for Chevron, is currently anchored off Lake Maracaibo awaiting orders

    UACC Eagle, which is bringing ~620.4k bbl of US heavy naphtha to Venezuela, is currently moored at the port of Jose to discharge.

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    Russia to Try to Limit Oil Discounts With Market Principles

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    The Urals grade, by far the country’s top export stream, was $37.80 a barrel at the Baltic Sea port of Primorsk on Friday, according to data provided by Argus Media. That was less than half where Brent futures settled on the same day.

    The ballooning discount follows the European ban on almost all seaborne crude imports from Russia that imposed from Dec. 5. Simultaneously, the European Union joined with the G-7 industrialized nations in imposing a cap on the price of Russian supply. Anyone wishing access to Western services — in particular industry standard insurance, but also an array of other things — could only do so if they paid $60 of less.

    The western price cap is “illegal” and will affect stability of the global energy supply, requiring “significant cooperative effort by responsible countries to remedy,” the ministry said, reiterating earlier statements by President Vladimir Putin and top Russian energy officials.

    Russia is prepared to cut its crude production by 500,000-700,000 barrels a day in response to the threshold, Deputy Prime Minister Alexander Novak said last month. 

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    War & Peace

    Thanks to a subscriber for this report by Zoltan Pozsar for Credit Suisse. Here is a section:

    Who is the Mystery Gold Buyer?

    Thanks to a subscriber for this report from TD Ameritrade. Here is a section:

    The rally in gold prices over the past two months has defied analyst expectations for continued weakness, including TD Securities'. Yet, we see little evidence that the rise in gold prices is associated with a changing macro narrative. Given the bearish macro backdrop, speculative interest in gold has remained exceptionally lackluster as the world barrels towards a recession, especially after accounting for recent shifts in CTA positioning. Still, gold prices have continued to firm, retracing more than 50% of their significant drawdown from 2022 highs. • This begs the question: who in the world is this mystery buyer driving prices higher? Armed with a flows-based approach, we present strong evidence that behemoth Chinese and official sector purchases may have single-handedly catalyzed a $150/oz mispricing in gold markets. What is less clear is what has driven these massive purchases. • We investigate whether a sanctions-evasion war chest associated a potential invasion of Taiwan, China's reserve currency ambitions, massive pent-up demand associated with the Chinese reopening, or Chinese New Year demand could be consistent with this extreme buying activity. Chinese demand appears unrelenting for the time being, but barring a grandiose geopolitical regime change, we find that it would likely subside towards normal levels in coming months. This would leave gold prices vulnerable to a steep consolidation lower, given gold's lack of alternative buyers and its current mispricing relative to its recent historical relationship with real rates. We turn to our tracking of positioning for the top ten gold traders in China to scour for nascent signs of peaking Chinese demand, which could present a tactical signal for a noteworthy repricing lower.

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    AI and the Big Five

    This article from Ben Thompson may be of interest to subscribers. Here is a section:  

    Indeed, the biggest winners may be Nvidia and TSMC. Nvidia’s investment in the CUDA ecosystem means the company doesn’t simply have the best AI chips, but the best AI ecosystem, and the company is investing in scaling that ecosystem up. That, though, has and will continue to spur competition, particularly in terms of internal chip efforts like Google’s TPU; everyone, though, will make their chips at TSMC, at least for the foreseeable future.

    The biggest impact of all though, though, is probably off our radar completely. Just before the break Nat Friedman told me in a Stratechery Interview about Riffusion, which uses Stable Diffusion to generate music from text via visual sonograms, which makes me wonder what else is possible when images are truly a commodity. Right now text is the universal interface, because text has been the foundation of information transfer since the invention of writing; humans, though, are visual creatures, and the availability of AI for both the creation and interpretation of images could fundamentally transform what it means to convey information in ways that are impossible to predict.

    For now, our predictions must be much more time-constrained, and modest. This may be the beginning of the AI epoch, but even in tech, epochs take a decade or longer to transform everything around them.

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    Base Metals Jump as Low Stocks Compound China Reopening Optimism

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Metals are finding favor again after a punishing 2022 that saw most notch large losses. An improving picture for Chinese demand is coinciding with investor bets on less aggressive rate hikes by the Fed, boosting the growth outlook while weakening the dollar in which commodities are priced.

    Market moves may be exacerbated by low exchange stockpiles, after supply was hobbled last year by the energy crisis. On Monday, copper climbed to the highest since June, while aluminum and rose more than 4% and zinc surged over 6%.

    Metals should rally as Chinese demand picks up after the Lunar New Year holidays later this month, Goldman Sachs Group Inc. analysts including Jeffrey Currie said in a note. There’s “significant price upside,” given extremely low global stockpiles of metals, they said. 

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    Brazil Asset Selloff on Protests Likely Short-Lived, Citi Says

    This note by Maria Elena Vizcaino for Bloomberg may be of interest. Here it is in full:

    Any pullback in Brazilian asset prices should revert quickly as the protests should be short-lived and not have major direct implications, Citigroup strategists led by Dirk Willer wrote in a note Monday. 

    The Brazilian real was the worst performer among 23 emerging market peers tracked by Bloomberg, weakening 1.2%

    The protests have been publicly criticized by far-right leaders, including former President Jair Bolsonaro, and they lack support from leaders in the executive, legislative and judiciary branches

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