Rising oil prices drive hotter-than-expected US inflation in August

Inflation headache returns for the Fed: US consumer prices climbed more than expected in August on the back of rising energy prices, according to data out yesterday. Inflation rose 3.7% y-o-y during the month from 3.2% in July, slightly above forecasts for 3.6% growth. Prices climbed 0.6% on a monthly basis.

Driving the growth: The bulk of the monthly increase came from increased gasoline costs, driven by rising global oil prices. Global prices have reached 10-month highs this month after Saudi Arabia and Russia agreed to extend supply cuts through to the end of the year in a bid to push oil prices towards USD 100 a barrel. OPEC data suggests that the curbs are setting the market up for its largest supply deficit in a decade in 4Q 2023, potentially triggering a fresh bout of volatility in the market.

Just what the Fed doesn’t want: The prospect of a fresh energy supply shock and USD 100 oil will complicate the Federal Reserve’s efforts to curb inflation and introduce fresh uncertainty into the markets about the direction of interest rates. Yesterday’s hotter-than-expected inflation data make it more likely that the central bank raises rates by another 25 bps in either its November or December meetings, analysts told Bloomberg yesterday.

Adnoc is looking to turn its “fledgling” trading business into a multi-bn USD operation before the decade is out, Bloomberg reported yesterday. The Emirati energy giant will focus on sales of LNG to Europe (filling a hole caused by Vladimir Putin) as well as Africa. Adnoc is pursuing contracts for LNG, crude, and refined fuels, the business information service says, flagging the focus on Europe and Africa as a “change in strategy” for the outfit, which traditionally focused on Asian markets.

Remember: Adnoc is eyeing a slice of our energy industry. Adnoc has been pursuing expansion in our neighborhood as it angles for a piece of the growing Eastern Mediterranean gas industry. The company in March submitted a bid alongside BP to acquire 50% of Israel’s NewMed, which owns 45% of the Leviathan gas field that feeds into Egypt’s Idku and Damietta LNG processing plants. Egypt is hoping to pump more LNG to Europe in the coming years after Israel agreed to ramp up exports from Leviathan. On the downstream side, Adnoc in February bought a 50% stake in one of our largest fuel retailers, TotalEnergies Egypt.

BP CEO Bernard Looney resigns: The multinational oil giant announced Looney’s departure on Tuesday, stating that he had not been “fully transparent ” aboutpast personal relationships with colleagues. No more details were given about the nature of the allegations. BP CFO Murray Auchincloss will act as interim CEO, according to the release.

THE CLOSING BELL-

The EGX30 rose 1.1% at yesterday’s close on turnover of EGP 1.5 bn (29% below the 90-day average). Foreign investors were net sellers. The index is up 32.6% YTD.

In the green: Ezz Steel (+5.1%), Talaat Moustafa Group (+3.5%) and Elsewedy Electric (+3.2%).

In the red: Juhayna (-1.5%), Edita (-0.8%) and Egypt Kuwait Holding (-0.8%).

Asian markets are uniformly in the green this morning. Futures suggest a mixed open in Europe (Euro Stoxx 50 and DAX 30 are trending up, while both the FTSE 100 and CAC 40 looking to open under pressure). Futures point to a comfortably green open for stocks in New York and Toronto later today.