The inside story on the historic U.S.-Venezuela oil deal and how it will work

My take #2 →  When we were in the Presidential palace, members of the Venezuelan media were clearly excited to be back. Officials who had been to the country earlier this year told me that some members of the media were openly weeping at returning to the capital. They had been banned, silenced or were simply too afraid to re-enter the building.  That is what we can hopefully help change. It's not just about oil.

Venezuela doesn't have the money to invest in and regrow its once-proud energy business.  It will take outside capital, know-how and human energy.  I'd take the U.S., Italy and other western countries over Russia and China any day of the week and twice on Sunday.  But maybe that's just me.

Anyway, here are photographs I took while in Caracas. Some were done quickly, so apologies that they lack professional quality:

Goldman Sachs with 3 big themes to watch around agriculture and even energy markets heading into the fall. The first is, naturally, Hormuz. With Goldman worried that continued "diesel and fertilizer disruptions may raise input costs across agriculture. " Next up is the Black Sea risk, with Goldman analysts worried that rising Russia-Ukraine fighting will hit grains. The firm notes that this is peak wheat export season, and levels are below normal. The final theme is the weather and the risk of a "Super El Nino" system that could be one of the strongest on records, cutting water levels in the Panama Canal.

UBS sees Brent above $100 as a sort of milestone, not a turning point for global markets. It just raised its Brent crude forecast to $95 at the end of this year and $90 in March of next year.

Not to be outdone, Bank of America also recently raised its Brent crude forecast to $85 this year and $75 next year. It also is one of the rare firms daring to put out a much longer 2028 forecast of around $70 from 2028.

My take → While I love BofA's moxie, the late, great Boone Pickens told me that trying to forecast oil prices more than a few months out was nearly impossible.  

One other big thing Wall Street is watching is how oil prices are impacting borrowing costs. Bond yields around the world are on the rise. Here in America, our 10 year government note is sniffing a yield of 5%. That's a level we haven't had since 2007!  Fedwatch Advisors Ben Emons highlights how the spot-oil-bond-yield correlation has risen to 0.75, higher even than during the Great Financial Crisis.  Emons notes that high oil - and thus higher inflation - will impact central bank thinking. The U.S. Federal Reserve has a big meeting next Wednesday the 16th.  It's increasingly likely America gets an interest rate hike.

My take → Respectfully to our Federal Reserve, I'm not sure what a slight interest rate hike is going to do to stem the impact of a war-related oil price shock. And boy, are those fall 2024 interest rate cuts looking more and more ill-timed and, frankly, bizarre.