EUR/USD rises above 1.06 to the best levels since June 10

EURUSD daily

The US dollar is broadly soft today but the euro and pound are particularly strong. I’m a bit wary of price action this late in the month and without a clear catalyst. German yields have risen 9.5 bps today compared to 5.7 bps in the US so there’s some spread support but that’s thin pickings.

Europe continues to face down a potential disaster with Russia natural gas imports severely curbed and a portion of US LNG exports offline.

Heads up: OPEC+ meeting later this week

OPEC+ last met earlier this month on 2 June, where they decided to increase output by 648k bpd in July, up from the initial plan of 432k bpd. They are expected to carry that policy stance into August later this week when they meet on 30 June. That is despite the fact that US president Biden will be heading to Riyadh next month – where he is supposedly going to discuss on ‘energy security’.

Just be wary that the current oil output deal is set to expire in September and even now, they are already struggling to lift output further amid the lack of spare capacity. That is something to take note of when weighing up the tightness in the oil market in general.opec flag picture

G7 still working on precise mechanism to implement price cap on Russian oil – US official

  • To issue coordinated steps tomorrow to raise pressure on Russia
  • G7 close to setting global price cap for Russian oil
  • Targeting services for transporting Russian oil is a ‘promising avenue’
  • US will impose higher tariffs on Russian goods worth about $2.3 billion

It looks like they may not reach an agreement for a price cap per se at this meeting but that will be the direction that they are looking to push towards at least. The real challenge is really to get commitment from nations outside of the G7 but I guess we’ll have to see how the politics get involved on that matter.

Ecuador says its oil output may stop completely in 48 hours

  • Ecuador’s energy ministry warned Sunday that oil production had reached a “critical” level and could be halted entirely within 48 hours if protests and roadblocks continue
  • “Oil production is at a critical level,” the ministry said in a statement.
  • “If this situation continues, the country’s oil production will be suspended in less than 48 hours as vandalism, the seizure of oil wells and road closures have prevented the transport of equipment and diesel needed to keep operations going.”
  • “Today the figures show a decrease of more than 50 percent” in production which, before the protests, was at roughly 520,000 barrels per day, it said.

After dropping earlier oil prices have bounced:

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