Brent, the global crude oil benchmark, is trading at a rare discount to its Middle Eastern counterpart, as President Donald Trump cracks down on Russian barrels and a glut is forecast for later in the year https://t.co/SjTlj23dX1 ...

August 21, 2025 06:40 PM GMT The Oil Manual | Europe Heading for the Most- Anticipated Surplus The oil market is heading for a surplus in coming quarters that is both unusually large but also unusually well-anticipated by now. The former suggests prices will likely weaken; the latter suggests this is unlikely to turn into a disorderly sell-off. We stick with our $60 Brent forecast by 1Q. Key Takeaways Exhibit 1: Refinery crude runs are currently at their highest level for several quarters to come | M August ...

Investment Rating - The report does not explicitly provide an investment rating for the industry discussed Core Insights - The report highlights the potential for energy prices to rise again due to geopolitical risks in the Middle East, particularly if Iranian oil supply declines or if there are disruptions in the Strait of Hormuz [1][2] - It discusses the implications of soft data on the US economy, indicating that higher tariffs may lead to a slight increase in unemployment and below-potential GDP growth, with inflation rebounding to the mid-3% range [9] - The report emphasizes the outlook for the Chinese Yuan (CNY), predicting further appreciation due to the strength of China's export sector and the currency's undervaluation against the Dollar [10][12] - It notes the expected increase in defense spending in the Euro area and the UK, projecting spending to rise to 2.7% and 2.5% of GDP respectively by 2027 [14] - The potential disruption of profit pools due to AI technology is also highlighted, with past technology transitions serving as a precedent for significant market changes [14] Summary by Sections Middle East Risks - The report indicates that while the initial market reaction to the Iran-Israel ceasefire has reversed, the situation remains uncertain, with potential for energy prices to rise significantly if Iranian oil supply is disrupted [1][2] - It estimates Brent crude oil prices could peak at around $90/bbl under certain scenarios, with extreme cases exceeding $110/bbl [1][6] Soft Data Insights - Company commentary suggests a reduction in job openings and capital spending expectations, indicating a cautious outlook due to policy uncertainty [9] - The report anticipates a slight increase in unemployment and a one-time inflation rebound, with the Federal Reserve expected to implement rate cuts [9] CNY Outlook - The report lowers USD/CNY forecasts to 7.10/7.00/6.90 for the next 3, 6, and 12 months, citing the potential for CNY appreciation [10][12] European Defense Spending - The report expresses optimism regarding the European defense renaissance, with expected increases in defense spending by 2027 [14] AI Disruption - The report discusses the potential for AI to disrupt existing profit pools, drawing parallels to previous technology transitions [14]

Core Viewpoint - The volatility in ExxonMobil's stock price is attributed to investor reactions to geopolitical tensions following U.S. military actions against Iran's nuclear facilities, with initial fears leading to a decline in oil prices as the actual Iranian response was less severe than anticipated [1][2][5][6]. Group 1: Market Reactions - ExxonMobil's shares experienced fluctuations, initially rising by 2% before dropping to a 3.1% decline, ultimately closing down 2.5% [1]. - Oil prices fell significantly, with Brent Crude Oil prices decreasing by 6.8% and natural gas prices down by 4% as investors reacted to the perceived less severe Iranian response [6]. Group 2: Geopolitical Context - The conflict began with Israeli strikes on Iranian military and nuclear targets, leading to heightened oil and gas prices [3]. - Investors were concerned about potential worst-case scenarios, including the blockade of the Strait of Hormuz, through which approximately 21% of the world's oil flows [4]. Group 3: Future Outlook - The initial Iranian response was characterized as symbolic, suggesting that further escalation may not be imminent, which provided relief to the markets [5][8]. - Despite the current situation, oil and gas stocks are expected to remain volatile due to ongoing geopolitical uncertainties, and they should be considered as part of a diversified investment strategy [7][8].

Investment Rating - The report raises Brent price forecasts by up to $10/bbl, reflecting a justified risk premium of approximately $10/bbl due to geopolitical uncertainties [5][45]. Core Insights - The report outlines three potential scenarios for future oil prices amid increased military activity between Israel and Iran, with the majority of probability concentrated in scenario 1, which suggests no disruption to oil supply [8][43]. - Scenario 1 predicts Brent prices could decline back to around $60/bbl if oil exports from the region remain unaffected [15][21]. - Scenario 2 anticipates a sharp reduction in Iran's exports, potentially leading to a balanced market with prices around $75-80/bbl [22][28]. - Scenario 3 considers the risk of wider supply disruptions, which could push prices to $120/bbl, but this scenario is viewed as an outlier [30][36]. Summary by Sections Price Forecasts - The new Brent price forecasts for 2Q25, 3Q25, and 4Q25 are $72.5, $67.5, and $65.0 respectively, reflecting significant upward revisions from previous estimates [6][49]. - The report indicates that the risk premium may dissipate over time, with a long-term forecast of $60/bbl for 2H26 [45][49]. Scenarios Analysis - **Scenario 1**: Military conflicts do not disrupt oil supply, leading to a potential price drop to ~$60/bbl if Iran's oil infrastructure remains intact [15][21]. - **Scenario 2**: A decline in Iran's exports could balance the market, with prices expected to stabilize around $75-80/bbl [22][28]. - **Scenario 3**: Significant supply disruptions could necessitate demand destruction, potentially raising prices to $120/bbl, although this is considered less likely [30][36]. Market Dynamics - The report notes that Brent prices have rallied approximately 7% following recent geopolitical events, indicating a shift in market sentiment [9][11]. - The disappearance of contango in the 2026 forward curve suggests that market participants no longer anticipate oversupply, reflecting a more bullish outlook [11][12]. Supply and Demand Balance - The current oil liquids supply/demand model forecasts a surplus of ~1.3 mb/d in 2026, with a smaller surplus of 0.8 mb/d when considering only crude oil [26][27]. - If Iran's oil exports were to decline significantly, the expected global surplus could be eroded, leading to a more balanced market [27][28].

Summary of Key Points from Conference Call Industry or Company Involved - Focus on the Asia-Pacific (APAC) markets, particularly highlighting the KOSPI index and oil market dynamics Core Insights and Arguments 1. **Asia Leaders Conference**: The inaugural APAC forum is scheduled for September 3-5 in Hong Kong, with an initial list of approximately 120 corporate participants expected to double in the coming weeks [3][4] 2. **US Market Sentiment**: The S&P 500 index is currently down 113 basis points, just 3% shy of all-time highs, indicating a relatively calm equity market despite geopolitical tensions [5][6] 3. **Investor Positioning**: The GS Sentiment Indicator shows light investor positioning due to recent ETF and equity mutual fund outflows, with concerns about missing market rebounds [9][11] 4. **Household Equity Allocation**: US households now hold 50% of their total financial assets in equities, a record high, with 401(k) plans showing a 70% equity allocation [13] 5. **KOSPI Performance**: The KOSPI is the top-performing market in Asia year-to-date, with a medium-term view suggesting domestic positives will outweigh global cyclical risks [20][21] 6. **Oil Price Forecast**: Limited disruptions to Middle Eastern oil supply are expected, with Brent crude projected to fall to $59 by year-end and $56 next year, although short-term risks could push prices higher [17][18] 7. **Foreign Institutional Investment**: Foreign institutional investors net bought $3.6 billion month-to-date, indicating a recovery from previous sell-offs [22] 8. **Sector Adjustments**: Technology hardware and semiconductors have been upgraded to market weight, reflecting positive sentiment in these sectors [29] Other Important but Possibly Overlooked Content 1. **Geopolitical Risks**: Potential escalation in the Middle East could lead to significant spikes in oil prices, with extreme scenarios suggesting prices could exceed $100 [18] 2. **Macro Economic Indicators**: Upcoming key economic data releases include retail sales, industrial production, and housing starts, which will be crucial for market direction [15] 3. **Historical Context**: Historical performance during supply-driven oil price shocks suggests that Australia, China A-shares, Malaysia, and Thailand tend to outperform, particularly in energy and defensive sectors [36] 4. **Best Investment Ideas**: Post-election investment ideas include Coupang, HYBE, and SK Hynix, with a focus on reform beneficiaries [28] 5. **Global Economic Outlook**: The US GDP growth forecast for Q4 2025 has been raised to 1.25%, with recession odds reduced to 30% [41] This summary encapsulates the key insights and data points from the conference call, providing a comprehensive overview of the current market landscape and investment opportunities in the Asia-Pacific region.

Report Industry Investment Rating - Short - term: Oil prices are expected to be volatile and bullish; Medium - term: Bearish allocation for oil prices [3] Core View - China's crude oil inventory reached a record high this year, with on - land crude oil inventory reaching 1.1 billion barrels. The large - scale restocking in Q2 was mainly due to high imports, likely a result of increased US sanctions on Russia at the beginning of the year and geopolitical uncertainties after Trump took office. This restocking behavior has advanced demand, and future restocking is likely to slow down [2] Summary by Relevant Catalogs Market News and Important Data - NYMEX July - delivery light crude oil futures rose 71 cents to $65.29 per barrel, an increase of 1.10%; ICE August - delivery Brent crude oil futures rose 56 cents to $67.04 per barrel, an increase of 0.86%; SC crude oil's main contract closed up 1.16% at 479 yuan per barrel [1] - The Iranian Foreign Ministry spokesman said the US plan on the Iran nuclear deal was unacceptable, and Iran will send its plan to the US via Oman. The next round of nuclear negotiations with the US is expected to be held in Oman on Sunday [1] - Iraq set the official selling price of Basra Medium crude oil for July to Europe at a $1.30 - per - barrel discount to Brent crude; to North and South America at a $1.05 - per - barrel discount to Argus sour crude; and to Asia at a $0.30 - per - barrel premium to the Oman/Dubai crude oil average [1] - CBOT soybean oil futures rebounded, with the benchmark contract up 1.3%, rebounding from a one - and - a - half - month low. This was mainly due to eased Sino - US trade tensions, stronger international crude oil futures, and expectations of the US EPA's biofuel blending policy. The US Senate is debating a new tax bill including fiscal support for the biofuel industry, and the market is positive about subsidy continuation, boosting soybean oil demand expectations. The US EPA is expected to release biofuel blending regulations in mid - June [1] Investment Logic - China's recent crude oil inventory reached a historical and annual high, with on - land inventory at 1.1 billion barrels. The large - scale restocking since Q2 was due to high imports, likely a response to geopolitical uncertainties. This behavior has advanced demand, and future restocking is likely to slow down [2] Strategy - Short - term: Oil prices are expected to be volatile and bullish; Medium - term: Bearish allocation for oil prices [3]

Investment Rating - The report maintains an "Overweight" (OW) position on cash, equities, credit, and bonds, while being "Underweight" (UW) on commodities for the next three months [3][21]. Core Insights - Emerging Market (EM) equities have shown resilience despite tariff uncertainties, with a projected earnings growth of 10% to 11% for CY 2025/26, which is 2-3 percentage points higher than previous forecasts [2][6]. - The S&P 500 had its best May performance since 1990, outperforming EM equities year-to-date, although EM equities have generally outperformed US equities in the same period [2][7]. - A weaker US Dollar is expected to support EM outperformance, as EM equities have historically benefited from a weaker Dollar [2][14]. Summary by Sections Economic Outlook - The report highlights the importance of upcoming economic data and decisions from G4 central banks, with expectations of a 25 basis point rate cut by the ECB and stable unemployment rates in the US [1][2]. Market Performance - The S&P 500's performance in May 2025 was notably strong, while EM equities have shown positive macro surprises, contrasting with muted US macro surprises [2][9]. Asset Allocation - The report suggests a diversified approach, advocating for international diversification in equities and bonds, and highlights the potential benefits of EM equity and local rates [3][6][21]. Correlation Analysis - The correlation between MSCI EM and the US Dollar has turned more positive, indicating a decoupling of EM rates from US rates, which may provide investment opportunities [16][18].

Financial Data and Key Metrics Changes - The energy business has seen revenues nearly double over the last three years, with a year-over-year volume increase of 18% [3][4]. - The company has experienced a healthy double-digit growth despite a perceived slowdown since May [4]. Business Line Data and Key Metrics Changes - The energy market is undergoing significant changes due to trade policies and energy transition discussions, impacting risk management and trading volumes [5][6]. - The mortgage business has seen a decline in new loan volumes due to high interest rates, but the total addressable market (TAM) is believed to have grown due to acquisitions like Black Knight [34][35]. Market Data and Key Metrics Changes - The company has adapted to changes in the energy ecosystem, including shifts in LNG trade routes and OPEC+ volatility, which could impact long-term business [17][19]. - The bond business grew by 30%, indicating a strong performance compared to peers, which remained flat [66]. Company Strategy and Development Direction - The company is focused on building a network for mortgage services, emphasizing the importance of connectivity among market participants rather than just software solutions [46][50]. - The company aims to leverage its existing infrastructure to enhance efficiency and reduce costs in the mortgage process, potentially leading to increased pricing power [51]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the energy business's resilience despite geopolitical uncertainties, noting that the risk management framework can accommodate various outcomes [10][28]. - There is a positive outlook for the data business, with increased demand and engagement from clients, indicating a shift from previous hesitance [78][80]. Other Important Information - The company is training internal successors for leadership roles, aiming for continuity in management and strategic direction [86][88]. - The company has initiated share buybacks as part of its capital allocation strategy, indicating confidence in its valuation and future growth prospects [75]. Q&A Session Summary Question: Is retail trading a priority for ICE? - Management indicated that while there was initial concern about retail trading competition, the company has shifted focus to empowering its B2B clients through technology [58][60]. Question: Is ICE still ambitious about the analog to digital conversion in fixed income trading? - Management acknowledged being late to the conversion but noted that the bond business has grown significantly due to the development of a high-value ecosystem [63][66]. Question: What is the pipeline for new mortgage deals with large banks? - There is ongoing competition between non-bank and traditional banks, with discussions about potential regulatory changes that could benefit large banks and increase their investment in digital platforms [71][72].