It looks like the Federal Open Market Committee, in the Fed minutes, may have to change its target on raising rates as the global economic story continues to change minute by minute.
The Fed, while saying that outlook for the rate hike still looked good, is possibly worried about China and Greece concerns that may cause the Fed to rethink that target. The concern is that plunging commodity prices may start to cement in a deflationary mood to the market. Also, it's possible a rate-hike in the United States may cause even more harm to those Euro zone markets. Also, we could harm our markets--a possible capital flight could raise the dollar to dangerous levels.
Despite the turmoil in China, and Europe economic data out of Japan and Germany and an artificial rally in the Shanghai composite is giving crude oil some hope. We saw German exports hit the highest level of the year and Japan machinery orders hit a 7-year high in May. This played into the pre-crisis scenario that global economic stimulus was setting the stage for stronger than expected energy demand. Yet, because of the turmoil, the market fears that those numbers may or may not be in the rear view mirror. The majority of the Eurozone economies are really doing pretty well thanks to low rates and quantitative easing.
The other factor that could be supporting crude is the fact that a deal with Iran to lift sanctions may not be as close as we think. The Wall Street Journal reports that "Tensions in the nuclear talks between Iran and six powers have boiled over in recent days, producing heated exchanges among foreign ministers as Washington and Tehran struggled to overcome remaining hurdles to a final agreement, according to people involved in the talks."
The Journal says that "the German and British foreign ministers returned to the Austrian capital Wednesday evening as Western diplomats insisted a deal was still possible in coming days. However, time was running out for the agreement to be sealed before a deadline this week, which would give the U.S. Congress an extra month to review a deadline.
People close to the talks have warned that the longer Congress and opponents of the diplomacy get to pick over an agreement and galvanize opposition, the greater the political risks for supporters of the process, which aims to block Iran's path to nuclear weapons in exchange for lifting tight international sanctions.
Iranian media cited a shouting match between Secretary of State John Kerry and Iran's Foreign Minister Javad Zarif, which forced a U.S. aide to intervene and warn the ministers their voices could be heard, beyond the meeting room, according to the account. Two Western officials and Iranian media also said that during discussions among foreign ministers on Monday, European Union foreign policy chief Federica Mogherini threatened to leave the negotiations, prompting a shouted response from Mr. Zarif to never threaten an Iranian. Russian Foreign Minister Sergei Lavrov added "nor a Russian," according to the accounts. Also there are reports that Russia is backing Iran saying that the world powers should lift the arms embargo against Iran which would be an absolute deal killer in the U.S. congress. No deal no oil.
Technically oil should rebound from these levels but may be tentative ahead of the Greek decision and more China fears.