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Geopolitical Shocks That Could Reshape Financial Markets in 2025 
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U.S. Stocks vs. Bonds: Are Diverging Valuations Signaling a Shift? 
OCBC Raises Gold Price Forecast to $5,600 as Structural Demand and Uncertainty Persist 
Stock Futures Dip as Investors Await Key Payrolls Data 
This week OPEC+ leaders Saudi Arabia and Russia agreed to a preliminary deal to extend oil production cuts through July. The original OPEC + pact signed in April foresaw the 9.7 mbd cuts in June and May easing to 8 mbd between July 1 and year-end. But Saudi Arabia had been pushing to postpone bringing back in July the 1.7 mbd of the current cuts. The team’s balances suggest that without the extension of the current production cuts, global oil market will move into deficit only in September. Ultimately, the “Goldilocks” outcome is for the OPEC+ deal to be extended for one month. This extension will expedite rebalancing by two months with global markets moving into deficit in July.
In the US, early signs of a shale rebound are becoming evident. We continue to monitor whether US producers are likely to bring curtailed production back online with the rally in price. They have heard from two producers that much of their curtailed production would likely come back. They will continue to take their signals from what public producers have announced this earnings season and recognize that their US crude and condensate production outlook for June could be at risk for revising lower.
The team also boosted their 2Q demand estimates as a growing amount of reported statistics point to the previous outlook being a bit overly bearish. Looking ahead, Chinese demand is seen averaging just above 14 mbd in June and July, essentially pulling even on a yoy basis next month, yet global demand will still likely average about 12% lower yoy in June (88.0 mbd) and 10% lower yoy in July (91.2 mbd) as the rest of the world lags China’s recovery.
Foreseeing the puzzling swings in this energy commodity, we recommend long hedges of CME WTI of June tenors, simultaneously, shorts in CME WTI futures of July’20 delivery for the major downtrend (spot reference: $38.25 while articulating). Thereby, one can ensure directional positions amid macroeconomic turmoil as emphasized in our recent posts. Courtesy: JPM
