The UAE’s French Exit

✈️ UAE is leaving OPEC🛢️

My gut feeling? This is long-term bearish for oil. Even though the OPEC cartel is past its prime, it still holds significant sway over global supply. Controlling supply is half the battle of controlling price (with demand handling the other side).

A smaller cartel naturally means a weaker grip on supply. That said, the UAE’s infrastructure has been meaningfully damaged by Iran, and the UAE doesn’t have any influence on the Strait of Hormuz.

Regardless, no one will know the impact until the UAE is back on its feet. Once they can pump and export at whatever clip they desire, that independent supply has the potential to be a long-term dampener on oil prices. And, in the event the UAE outperforms OPEC peers, then the UAE will have created a template for other members to walk away from the cartel as well.

New OpenAI Concerns… Yawn 🥱

Look, you either believe AI is big or you don’t.

If you’re a truther, you know demand is off the charts. Even if OpenAI drops the ball on its obligations, there’s a line of buyers ready to slit each other’s throats to put their money to work.

If you’re truthless, you thought the demand was a mirage anyway.

Let’s not get cute. I see this as a perfect excuse to take profit in the market’s best stocks: hardware and semis. $SMH is well off the early session lows and has already recaptured the 5d EMA. No real technical damage. Just a little haircut off the top as algos race to make the wrong decision for the right reason.

Powell’s Last Presser

A rate hold this week is fully priced in, but the real suspense is on the messaging. Will Powell use his final meeting as Fed Chair to signal a posture shift?

Right now, the Fed is on hold with a slight cutting bias. But with oil throwing a wrench into the inflation narrative, there’s chatter that the FOMC statement might drop the cutting bias and shift to a strictly neutral hold.

I expect him to hand off the Fed in a state of stability. Sticking to the playbook of the last 3-6 months makes sense. No reason to rock the boat on the way out and add an additional obstacle for Warsh, who the market is bound to test as the new Chair.