The Fast and the Furious

Daily update

A lot happened around the oil market: US president Trump announced a deal with Russian President Putin to buy Russian diesel; the Houthis attacked Riyadh airport in Saudi Arabia; Trump announced an “energy ceasefire” between Russia and Ukraine; Russia subsequently attacked Ukraine energy facilities; the US reportedly threatened to stop arms sales to Ukraine if they attacked Russian energy facilities.
This activity highlights the political significance of the US affordability crisis. There is a risk that focusing so much on diesel prices will allow profit-led inflation (expanding margins and blaming diesel for price increases). This has not happened so far, but the dominance of the narrative drives profit-led inflation.
The focus on Russia may imply a low probability for an Iranian deal. The Russian diesel sales are not expected to make much difference to diesel prices, but the US administration can claim to be doing something. The political importance of this week’s US consumer price data is increased, but affordability is more about inflation perceptions (reportedly rising for independent voters).
The EU and China concluded a sixteen-point agreement that will allow European consumers to pay more for cars they do not really want to buy (with China limiting hybrid vehicle exports). Economic nationalism makes trade tension a recurring issue.