Oil tanker jam

The European Union announced a price cap of $60 a barrel on Russian oil exports. The deal prohibits the insurance of any tankers from G7 nations carrying oil at a greater price, which briefly left dozens of tankers queueing at the mouth of the Black Sea. Despite obvious supply issues, the price of oil touched the year lows, before swinging back above $80 a barrel as China announced an unlocking of Covid restrictions. Meanwhile, as the oil majors reported record profits, the value of ExxonMobil overtook Tesla for the first time since 2020.

China unlocks

China’s strict zero-Covid policy was abandoned after widespread protests. The unlocking was welcomed, following months of restrictions which have put the brakes on the Chinese economy and impacted global demand. The risk remains that the coronavirus could spread unchecked among a largely unvaccinated population, with some models predicting up to 1 million fatalities. China has adjusted its classification of Covid deaths in response. A rebound in growth and an easing of global supply chains should follow, although there are few forecasts of this positive outcome before next summer. 

Recession top trump

The markets are buzzing with talk of the steepest inversion of the US Treasury bond yield curve for more than forty years. But what does this mean? Put simply, short-dated bonds are pointing to interest rate hikes, while long-dated bonds are predicting slower growth in the future. That’s a good reflection of recent rhetoric from the US Federal Reserve (Fed). The Fed has promised to beat inflation out of the system with higher rates, even at the expense of economic pain. The message of the inverted yield curve could be that recession beats inflation.