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Piper Sandler Sounds Alarm: Shrinking Oil Buffers To Collide With Winter Demand

Zero Rss
4 weeks ago
Piper Sandler Sounds Alarm: Shrinking Oil Buffers To Collide With Winter Demand

Piper Sandler global energy strategist Jan Stuart wrote in a note on Friday that the physical oil market is flashing major warning signs, including disrupted exports, depleted inventories, and an ongoing diesel shortage crisis, all converging ahead of stronger fourth-quarter demand.

Saudi Arabia's export squeeze is becoming a major problem. The kingdom's crude shipments remain halved as Iran-backed Houthis begin to dent Red Sea loadings while Persian Gulf shipments remain depressed. Houthis overnight seized Mokha in the Bab el-Mandeb Strait, suggesting commercial traffic could begin to drop.  

Some crude crosses Hormuz through "dark" tanker passages along the Omani channel. But the partial recovery has not restored regional exports: Middle Eastern crude loadings averaged 13.3 million barrels a day in the week through Sept. 9, with Stuart warning that the shortfall is roughly 5 million to 6 million barrels a day.

Stuart added more color on the current state of the Gulf energy market: 

The Flowing Oil Data Digest

Dire Straits, Choking Oil Exports Through Two of Three Mideast Waterways

Sure this is "not a war" but the oil market is rallying like it is: Futures gained ~$10/b on the week (so far); structure is exploding; physical markets in Asia are leading - and are most dependent on Mideast exports. And, adding insult to economic injury, surging crude oil values are barely compressing diesel margins.

Seems to us that oil markets began to price several deep problems: 

A) there are no easy, quick resolutions to the war in the Mideast or the one in Ukraine. 

B) tellingly, Washington hasn't claimed an "imminent deal" in weeks - ask us for color from conversations with DC insiders at our 12th Annual Piper Sandler Macro Conference. 

C) physical market behavior underscores that there are real supply deficits of crude oil, 3-4 mb/d, and traded diesel supply remains short too.

In vogue suddenly are Saudi troubles the Houthis have curtailed Red Sea crude oil loadings, while its Persian Gulf loadings remain moribund. Aggregate KSA crude oil exports have averaged barely 3 mb/d (less than half of 'normal') since late July. This week, Houthi attacks and military advances threaten a longer lasting choke-hold. Absolutely fascinating is that reportedly Pres Trump twice declined to assist MbS who, again reportedly, asked for him to bomb the Houthis.

Lastly, sentiment is turning on Q2 demand' destruction' that in fact that was more 'suppression' (i.e. it comes back again) and inventory depletion (i.e. unsustainable). Inside: market signals and loadings data.

2026 Brent: Spot Brent v Dubai pulling away

Shape of the Brent Futures Curve (month 1-6)

MARKET SIGNALS AND DATA TO WATCH – MIDEAST LOADINGS AND DIESEL SCARCITY

Things are tightening up in a hurry, as we approach peak seasonal demand in Q4 with far less inventory

Asia's refiners scramble to fill Q4 schedules …

  • Much is made of "China buying again" we don't know if it is, but it strikes us that given historic diesel margins, every refiner that can run crude oil is buying to run At the margin, that means that even simple, hugely cost disadvantaged refiners will want more crude oil.
  • And the easy to get at oil released during the MoU phase of the war on Iran - some 200-300 mbs worth - has been digested, nor is there nearly as much inventory left to draw on.
  • Despite sustained relatively high crude oil exports through the SoH - or about 9 mb/d, total Mideast exports remain some 5 mb/d below normal judging from the latest daily loadings data, see p. 2.
  • China's crude oil buying may have picked up, it was way too low (down >4mb/d to 7 mb/d). We model imports of 10 mb/d in Q4
  • We think and model that China did not suppress its final oil product demand by that much and instead drew some 250+ mbs from its vast inventories. In an open-ended supply disruption no one (China included) can keep drawing down inventories.

Indicative Margins: ~2x normal on global supply shock diesel, rbob and the gross 3:2:1 margin v dated brent

Strength (=backwardation) in Key Crude Oil Markets (Futures contracts 2-7, $/b)

China's Crude Oil Inventory: Volume & import cover

WHAT FLOWS: MIDEAST OIL LOADINGS & TRANSITS, IMPLIED DEFICITS OF ~5 MB/D

For the record, since July 15th overt SoH crossings have been sharply reduced; but there is a more or less steady flow of dark passages through the Omani channel

  • Mideast crude oil loadings averaged 13.3 mb/d (7 days ending September 9th). That's a post-MoU record.
  • But traffic in the SoH is still far from normal
  • And Saudi Red Sea flows remain below wartime par…

We compile tanker loadings (Petro-Logistics) and monitor refiner utilization (OilX et al).

  • Mideast crude oil loadings are running about 6 mb/d below normal with SoH gains offset by Red Sea declines
  • The market seems to have finally woken up about Red Sea issues - these involve the UAE, Oman and Saudi's Red Sea terminals. Latest: outside Hormuz is down ~3 mb/d from peak
  • Add to that a deficit of some ~2-3 mb/d of NGLs and add to that deficit our guesstimate of some 3 mb/d of the roughly 5 mb/d of clean products that were exported from the Mideast and that will not run normally for a while yet …

Redirecting of flow through new-/expanded-pipes will take anywhere from 1-2 yrs (UAE & Saudi) to from 3+ yrs to never

Mideast loadings rise to 13.3 mb/d Based on daily tracking

Mideast Port Loading Deltas of Crude Oil + Cond.

To sum up, the partial recovery in Hormuz flows has not resolved the physical supply deficit, while new pressure on Red Sea exports is derailing the critical alternative route. With inventories depleted and fourth-quarter demand approaching, the market has less capacity to absorb further disruption, leaving crude and diesel prices vulnerable to even higher prices. 

Professional subscribers can track energy market trends here at our new Marketdesk.ai portal. 

Tyler Durden Fri, 09/11/2026 - 11:40
Tyler Durden

Rate-Hike Odds Soar Despite Lowest Core Consumer Price Inflation Since 2021

Zero Rss
4 weeks ago
Rate-Hike Odds Soar Despite Lowest Core Consumer Price Inflation Since 2021

Following fuel-driven jump in Producer Prices, consensus was for a concomitant jump MoM in Consumer prices this morning, after last month's decline as energy prices have rebounded (though we warned that amid all the interventionist-y chatter, nothing would surprise us less than 'cool' print to offset the PPI scare).

And analysts were right with headline CPI rising 0.4% MoM (exactly as expected) - biggest MoM since May - but prices rose 3.5% YoY (in line with expectations and flat to the prir month)...

Core Services accelerated...

...BUT Fuel prices dominated the rise in headline CPI...

Headline CPI rose 0.4% MoM in August, after rising 0.1% in July. Over the last 12 months, the all items index increased 3.4%.

  • The index for energy increased 2.1 percent over the month: The index for gasoline rose 3.9% in August, accounting for over one third of the monthly all items increase.
  • The shelter index rose 0.3 percent in August after rising 0.1 percent in July.
  • The index for food increased 0.1 percent over the month, as the index for food away from home increased 0.3 percent.

Just like we saw yesterday with PPI, the rebound in crude (and refined product) prices snapped CPI's Energy component notably higher...

 Energy helping on a 6m annualized basis but hurting on a 3m annualized basis...

Core CPI rose 0.3% (0.29% rounded up) MoM (hotter than the 0.2% exp) but on a YoY basis it decline from 2.5% to 2.4% - the lowest since March 2021...

Core CPI rose 0.3% after increasing 0.2% in July. Core CPI rose 2.4% over the year, following a 2.5% increase over the 12 months ending July.

  • Indexes that increased over the month include communication, lodging away from home, airline fares, education, and used cars and trucks.
  • Conversely, the index for medical care and the index for motor vehicle insurance were among the major indexes that decreased in August.

MoM Core CPI (0.3%) Details

  • The shelter index increased 0.3% over the month after rising 0.1% in July.
  • The index for owners’ equivalent rent rose 0.2% in August as did the index for rent.
  • The lodging away from home index rose 2.4% in August after falling 2.8 percent the previous month.
  • The index for communication increased 2.3% over the month after rising 0.6% in July.
  • The airline fares index rose 2.7% in August, and the education index increased 0.8%.
  • The index for used cars and trucks increased 0.4% in August, and the index for new vehicles rose 0.3%
  • The personal care index and the household furnishings and operations index also increased over the month.
  • The medical care index decreased 0.2 percent in August after rising 0.4 percent in July.
  • The index for dental services fell 0.6 percent over the month.
  • The hospital services index, physicians’ services index, and prescription drugs index were all unchanged in August.
  • The motor vehicle insurance index declined 0.8 percent in August after falling 0.3 percent in July.
  • The index for apparel was unchanged in August as was the index for recreation.

YoY Core CPI (2.4%) Details

  • The shelter index increased 3.0 percent over the last year.
  • Other indexes with notable increases over the last year include airline fares (+23.4 percent), recreation (+2.7 percent), medical care (+1.6 percent), and personal care (+3.8 percent).

Shelter dropped...

  • Shelter Inflation rose 0.26% MoM, and up 2.75% YoY, down from 2.86% YoY in July and the lowest since March

  • Rent inflation rose 0.23% MoM, same as July, and up 3.04% YoY, down from 3.18% in July and the lowest since March

The much-watched SuperCore CPI (Services ex-shelter) rose notably on a YoY basis...

...with a big spike in Education & Comms costs...

Driven by a record jump in Telephone Services...

Which was all Wireless Telephone price hikes...

Here's JPMorgan with an explainer:

Education and communication goods: This category posted a near-record 1.3% rise in July, led by computer prices, as Apple repriced its Mac and iPad products.

Memory prices should continue to put upward pressure on computers and phones, which sometimes takes the form of new features being combined with price increases. 

One more thing...

Bloomberg's Simon White notes that the fastest-changing input in the CPI report betrays signs that AI spending is leaking into consumer prices via the information and information processing sector.

The chart below shows the change in each CPI component’s contribution (based on its weight in the basket) to the year-on-year headline number between July and August.

The information processing sector is contributing only 0.03 percentage points to the headline rate of 3.4% at the moment, but this has risen faster than any other sector.

It includes IT hardware, where prices are starting to rise for semiconductor and memory chips, as data centers are massively fueling demand.

Apple recently announced a rise in the price of its iPhone.

If the impact from data-center spend continues, then it’s clearly an upside risk for CPI, but it should be borne in mind along with leading indicators for inflation, which are rolling over and anticipate a more subdued backdrop for price pressures over the next few months.

As an aside, real average hourly earnings growth was negative for the 5th month in a row (is it any wonder consumer confidence is low)...

On the bright-side, we are decoupling from the 19070s CPI analog...

Understandably, a lower CPI print is better for markets, and JPM's market scenario analysis affirms that:

  • Core MoM prints above 0.30%. SPX declines 1.5% – 2.5%; Odds 10.0%

  • Core MoM prints between 0.25% – 0.30%. SPX declines 25bp – 1%, Odds 25.0%

  • Core MoM prints between 0.20% – 0.25%. SPX gains 50bp – 1.25%, Odds 30.0%

  • Core MoM prints between 0.15% – 0.20%. SPX gains 1% – 1.5%, Odds 25.0%

  • Core MoM prints below 0.15%. SPX gains 1.5% – 2%, Odds 10.0%

For now, rate-hike odds soared to over 90%, almost certain pricing for a 25bps move higher by Warsh and his pals next week...

Rate-change expectations for 2026 has swung wildly this year from over 60bps of cuts in Feb to now 47bps of hikes (the highest of the cycle)...

Wall Street is now convinced Warsh is cornered...

Top Goldman short-term macro trader, Brian Bingham, noted that:

“The Fed is now in the most paradoxical of all positions, beholden to a single data print and potentially reactive to the rounding on the ECO screen…

Warsh told the market in his first press conference that he didn’t want to focus on the number to the right of the decimal point, but now it’s the number to the right of that one that will be the determinant. Waller’s speech on Thursday was surprisingly and overtly dovish, confirming our view that the Board skews heavily if not unanimously dovish relative to the regional presidents, but offered little new information beyond implicitly confirming a 30bp core CPI will merit a hike.

The market appears to be penciling the over/under at 25, but we struggle to see a meaningful rally on an in-line 20bp core print following this week’s jobs report; in a world where the meeting goes in pricing greater than 50% chance of a hike, the risk of the bond market interpreting a hold as a policy error seem far greater than the harm of hiking into above-target inflation.”

UBS FX team noted a somewhat muted reaction in currencies (dollar spiked then slipped lower)...

Warsh painted himself in a corner here. Well, we've gotten the hard language tough guy speech at Jackson Hole.

His remarks were prepared and his messaging was intentional.

Now, we've gotten the data - labor market print more robust, inflation still supported.

September FOMC pricing goes to just under 23bp immediately, so the market is pretty much fully expecting a hike to come.

At this point, it would be a massive blow to credibility if they fumble the football on following through with the adjustment, but the market seems to have been correct to lean into this data with a long USD gamma bias.

Interestingly, the yield curve is flattening rapidly (Fed credibility at the long-end? locked in hike will slow growth?)...

So while the world and his pet rabbit was watching for 0.2% or 0.3% - knowing energy would be a driver - it turns out it was cellphone carriers hiking prices that had forced Warsh into a corner.

Bottom line: surging cell phone prices (thanks to memory) were the deciding factor between the Core CPI printing 0.2% and 0.3%. https://t.co/KehMJOCgUj

— zerohedge (@zerohedge) September 11, 2026

The jawboning is over... it's shit or get off the pot time for Kevin (every new Fed head is tested early on by the markets).

Tyler Durden Fri, 09/11/2026 - 11:30
Tyler Durden

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