Hello there,
U.S. President Donald Trump is a big cheerleader for Big Oil but, so far, his second term of office has been a busted flush for the industry. U.S. energy stocks are down nearly 9% since inauguration compared to a 1.7% drop for the wider S&P and crude prices have slumped 20% to below many U.S. producers' breakeven costs.
The economic uncertainty caused by Trump's trade policies has cast a pall over global oil demand with the International Energy Agency forecasting a slowdown for the rest of this year. It's a risky environment for Saudi Arabia to be cranking open the taps. The kingdom wants to punish OPEC+ members for overproducing, but investors are already concerned about oversupply. Data from the U.S. Energy Information Administration this week showed crude stockpiles rose by 3.5 million barrels, compared with analysts' expectations for a 1.1 million-barrel draw. Trump is talking up the prospects of a US-Iran nuclear deal, which could see sanctions on Iranian oil lifted.
Despite the impact on the U.S. oil and gas industry, Ron Bousso, a Reuters energy columnist, says that Saudi Arabia's price war looks like an unspoken gift to Trump as he tours the Middle East. Trump called for OPEC+ to boost output to keep U.S. gasoline prices down days after taking office. Wanting to rein in energy prices is normal for any U.S. president, but it became doubly important for Trump as his trade war risks increasing consumer prices.
I spoke to Ron for this week's episode of Reuters Econ World, which as you might have guessed, is all about Saudi Arabia and oil. Listen here.
U.S. retail sales growth slowed in April as the boost from households front-loading car purchases ahead of tariffs faded and households pulled back on other spending against the backdrop of an uncertain economic outlook. Walmart, meanwhile, is warning consumers of higher prices, even with the reduced tariffs announced this week.
Republicans are advancing elements of Trump's sweeping budget package through Congress but what the president describes as a "Big Beautiful Bill" will add trillions of dollars to the nation's debt load, which at $36.2 trillion now equals 127% of GDP. Bond investors aren't impressed. U.S. Treasury yields are circling a one-month high of just above 4.5%.
Elections this weekend will show whether Central Europe is on a MAGA path that could widen rifts in the European Union over Ukraine. A pro-Trump hard-right lawmaker could win Sunday's presidential election in Romania, potentially destablising the EU and NATO member. Romania has the European Union's highest budget deficit, exceeding 9% of output, and investors are worried that a victory for George Simion could isolate the country and erode private investment. The economy grew just 0.2% in the first quarter, below market expectations, which could further complicate efforts to curb the deficit.
In Poland, two MAGA-fans could finish second and third in the first round of voting for a president. Opinion polls show the liberal Warsaw mayor Rafal Trzaskowski, as a probable winner, although most likely only after a runoff due on June 1 and after he shifted to the right to win over more conservative votes.
And finally, good news for Syria and Turkey with the end of U.S. sanctions on Damascus. An influx of capital is expected into the bankrupt Syrian economy with Turkish companies and banks set to benefit after Ankara strongly backed Syria's opposition during the war.
As always, I'd love to hear from you by hitting reply on this email or finding me on LinkedIn.
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