GS MORNING 1 Oil Tracker, 2 USDJPY Topside, 3 Korea Update, 4 Just The Charts and 5 AUD CPI Preview

Highlights from GS Research, Trading and Sales: 1) Oil Tracker, 2) USDJPY Topside, 3) Korea Update, 4) Just The Charts and 5) AUD CPI Preview

1) COMMODITIES RESEARCH (GRIGSBY) – Persian Gulf De-escalation vs. Red Sea Escalation – LINK

BOTTOM LINE: Spot Brent futures prices fell below $90/bbl on Monday following a pause in US and Iran attacks in the Persian Gulf. Iran and Oman are reportedly discussing a restart of Hormuz flows, potentially paving the way for resumed US-Iran talks. However, Red Sea attacks continued over the weekend as the Houthis claimed to target Saudi oil infrastructure, including a 0.4mb/d Jazan oil refinery (reportedly hitting a storage tank) and Yanbu port (where no damage is confirmed). We still expect Brent to moderate to $80 by year-end if Hormuz fully reopens by Q4, but Red Sea disruptions and attacks on Saudi oil infrastructure may pose a new source of upside risk for crude and refined products prices.

Flows: Our estimated Persian Gulf flows edged down to 41% of pre-war levels (7DMA) (Exhibit 1), as Hormuz and Yanbu Red Sea flows each declined by around 1.5mb/d from a week ago. Total Red Sea flows declined by over 3mb/d over the last week as Bab-al-Mandab flows declined by 2.1mb/d (7DMA). Saudi Arabia redirected about 0.5mb/d of Bab-al-Mandab flows via the Suez Canal last week, while Russia decreased its Red Sea exports by 2.2mb/d.

China: China net crude imports rose over 3mb/d over the last two weeks (14DMA), mainly on higher Saudi crude imports. China refinery utilization rates increased to 66% from below 60% in early July, driven by an increase in SOE runs, while independent refinery runs remained flat. As China prioritizes energy security, refineries reportedly can only use product export quotas if their storage remains at or above end-February levels. Although China net exports of refined products edged up from mid-July lows, we do not expect a large rebound given the government's priority to keep domestic markets well-supplied.

See our ‘Tensions in the Middle East’ Curated MarketView Dashboard here

CHART 1: Oil Exports From the Persian Gulf Are at 41% of Pre-War Levels (7-Day Moving Average), Down from 80% in Late June Before Renewed Tanker Attacks

CHART 2: Our Estimate of the Hit to Oil Flows From the Persian Gulf Has Doubled Since Early July and Now Stands at 13.7mb/d

2) FX OPTIONS TRADING (COX) – Cheapest USD Call for Fed

Buy 2m 10d USDJPY Calls Costs 7.1v

Heading into an asymmetric Fed meeting (live pricing of ~8bps hike) we like to own USD calls, and USDJPY stands out as one of the most interesting places to hold these.

CHART 1: This Option is Close to Multi-Year Lows at an Outright Level, Despite Containing 2x BoJ and 2x FOMC Meetings