Decision Time for EPA on RFS This Week
With Congress out, focus on reports, EU meeting, Russia gains in war with Ukraine
Washington Focus
Congress is in recess, again, but there is a lot of action for a holiday-shortened week.
The coming days bring an EU summit (Tuesday), OPEC+ supply talks (Thursday) and the U.N.’s latest take on the global food crisis (Friday). Big focus will be if the EPA lives up to a court-mandated release of key RFS information and if so, the details.
European Union leaders agreed to pursue a partial ban on Russian oil, paving the way for a sixth package of sanctions to punish Russia for the invasion of Ukraine. The sanctions would forbid the purchase of crude oil and petroleum products from Russia delivered to member states by sea but include a temporary exemption for pipeline crude until a solution is found that satisfies the energy needs of Hungary and other landlocked nations. It would cost Vladimir Putin up to $10 billion a year in lost export revenue, according to Bloomberg calculations, forcing Russia to sell its crude at a discount to Asia, where it’s already changing hands at about $34 a barrel cheaper than the price of Brent futures.
In the Russia/Ukraine war, President Biden said on Sunday that “we are not going to send to Ukraine rocket systems that strike into Russia.” The Wall Street Journal in an editorial wrote “Once again Mr. Biden is reassuring Vladimir Putin about what the U.S. won’t do.”
The U.S. and western allies have not decided on any plan to break Russia’s blockade of Ukrainian grain exports in the Black Sea. “Many countries in the world depend on Ukrainian grain,” Gen. Mark Milley, chairman of the joint chiefs of staff, said last week. ”As for what we’re doing about it, right now, we are — we don’t have any U.S. naval vessels in the Black Sea. We don’t intend to unless directed.” He added, “It’s a no-go for commercial shipping.” Meanwhile, Croatia, which has a long coast on the Adriatic Sea, is offering to allow Ukrainian exporters to use Croatian ports to ship its corn and wheat, according to consulting firm APK Inform.
Central bank digital currency (CBDC). The Center for Strategic & International Studies will host a discussion on CBDCs Wednesday morning. The panel will feature Miguel Díaz, head of the Toronto Centre of the Bank for International Settlements and former general director of payment systems at the Bank of Mexico.
Inflation still is a hot topic in Washington, especially as gasoline set another daily record during the holiday weekend. Meanwhile, Eurozone inflation rose faster than expected in the year to May, setting a new record for the bloc of 8.1% and piling pressure on the European Central Bank to speed up the withdrawal of its ultra-loose monetary policy. And, a double whammy for the French economy: inflation continues to rise and reached 5.2% in May, while first-quarter GDP has been revised down. ING Economics believes the French economy is currently in recession and is revising down its growth forecast for 2022
Some key events this week include:
- Tuesday: WOTUS definition. Environmental Protection Agency holds a virtual meeting of the Chartered Science Advisory Board including a review the scientific and technical basis of the proposed rule "Revised Definition of Waters of the United States"; and discuss recommendations received from the SAB Work Group for Review of Science Supporting EPA Decisions.
- Wednesday: China’s Xi Jinping. The Atlantic Council holds a virtual discussion “How Powerful is Xi Jinping?"
- Thursday: Fossil fuels. Competitive Enterprise Institute (CEI) Holds a virtual discussion on "Fossil Future: Why Global Human Flourishing Requires More Oil, Coal, and Natural Gas — Not Less."
- Friday: U.S. economic outlook. The American Bankers Association's Economic Advisory Committee holds a media conference call briefing to present the latest consensus economic forecast from top economists at some of North America's largest banks.
Economic Reports and Events for the Week
Key economic report is Friday’s Employment data. Economists forecast 329,000 jobs addition for the month to fall back from the 428,000 job adds in April. The unemployment rate is seen drifting to 3.5% from 3.6%.
Tuesday, May 31
- S&P Case-Shiller HPI
- FHFA House Price Index
- Chicago PMI: Institute for Supply Management releases its Chicago Business Barometer for May. Consensus estimate is for a 56.8 reading, slightly higher than April’s 56.4.
- Consumer Confidence: Conference Board releases its Consumer Confidence Index for May. Economists forecast a 4.7% month-over-month decline to 102. That would be the lowest figure for the index since February 2021. Retail spending has remained robust, even as consumer confidence has waned.
- Dallas Fed Manufacturing
Wednesday, June 1
- MBA Mortgage Applications
- PMI Manufacturing Final
- ISM Manufacturing: ISM releases its Manufacturing Purchasing Managers’ Index for May. Consensus estimate is for a 54.8 reading, roughly even with the April figure, which was lowest since September 2020.
- Construction Spending
- JOLTS: Bureau of Labor Statistics (BLS) releases its Job Openings and Labor Turnover Survey (JOLTS). Expectations are for 11.4 million job openings on the last business day of April, slightly fewer than the 11.55 million in March, which was a record. The labor market remains very tight, but more and more companies have recently announced layoffs or hiring freezes. Both Amazon.com and Walmart recently said that they were overstaffed.
- Federal Reserve. New York Fed President John Williams, St. Louis Fed President James Bullard scheduled to speak.
Thursday, June 2
- Jobless Claims
- ADP Employment: ADP releases its National Employment Report for May. Private-sector employment is expected to have increased by 350,000 jobs after a gain of 247,000 in April. The private sector has added 1.1 million net jobs since the start of the pandemic, according to ADP.
- Q1 2022 Productivity and Costs
- Factory Orders
- Fed Balance Sheet
- Money Supply
- Federal Reserve. Cleveland Fed President Loretta Mester scheduled to speak.
Friday, June 3
- Nonfarm Payrolls and Unemployment. U.S. employers likely added jobs at a healthy clip in May, though economists estimate the pace of hiring slowed as companies confronted a tight labor market and rising economic uncertainty. One key metric to watch: the unemployment rate. The economy is expected to add 317,500 nonfarm jobs, after a gain of 428,000 in April. The unemployment rate is seen edging down from 3.6% to 3.5%, which would match a half-century low, last reached in February 2020 — just before the Covid-19 pandemic landed with full force on the economy.
- ISM Services Index: ISM releases its Services Purchasing Managers’ Index for May. Economists forecast a 56 reading, about one point less than the April figure.
Key USDA & international Ag & Energy Reports and Events
EPA’s RFS details, another U.N. food price update and any news on getting the around 20 million tons of grain exported out of Ukraine.
On the energy front, the Organization of the Petroleum Exporting Countries and non-OPEC members will meet on Thursday. OPEC+ is expected to stick to oil production targets set last year, raising July output by 432,000 barrels per day, six members told Reuters. The U.S. other Western nations have repeatedly urged OPEC+ to speed up output hikes amid record inflation rates, but members have said that the oil market is balanced and that price hikes are unrelated to supply and demand fundamentals.
Tuesday, May 31
Ag reports and events:
- Export Inspections
- Crop Progress
- Agricultural Prices
Energy reports and events:
- European Council summit, day 2 of 2
Wednesday, June 1
Ag reports and events:
- Broiler Hatchery
- Food Expenditure Series
- Cotton System Consumption and Stocks
- Fats & Oils: Oilseed Crushings, Production, Consumption and Stocks
- Grain Crushings and Co-Products Production
- EU weekly grain, oilseed import and export data
- Malaysia’s May palm oil export data
- Holiday: Indonesia, South Korea
Energy reports and events:
- API weekly U.S. oil inventory report
- Genscape weekly crude inventory report for Europe’s ARA region
Thursday, June 2
Energy reports and events:
- EIA weekly U.S. oil inventory report
- U.S. weekly ethanol inventories
- EIA natural gas storage change
- Insights Global weekly oil product inventories in Europe’s ARA region
- OPEC+ meets, via video conference
- Holiday: Italy, U.K.
Friday, June 3
Ag reports and events:
- Weekly Export Sales
- CFTC Commitments of Traders report
- Peanut Prices
- Dairy Products
- FAO World Food Price Index
- FranceAgriMer weekly update on crop conditions
- Holiday: China, Hong Kong, Thailand, U.K.
Energy reports and events:
- Baker Hughes weekly U.S. oil/gas rig counts
