OIL PRODUCTS: Asian Naphtha to Rely on Gasoline Demand for Support in 2024
Dec-21 11:56
Asia’s naphtha market is likely to stay under pressure in 2024 amid squeezed olefin margins, although some support should come from gasoline demand, Platts said.
- Naphtha margins are expected to remain in negative territory in 2024, driven by overcapacity in downstream petrochemical markets which will cap operations.
- Heavy naphtha may find some support from gasoline blending, with the sector in Asia expected to remain firm in 2024 and see rising regional demand.
- "Overall naphtha demand is likely to pick up from such [Chinese petrochemical] projects. However, heavy naphtha is likely to receive more support rather than light naphtha. The poor olefins outlook might hinder demand," an Asian petrochemical producer told Platts.
SourcE: S&P Global Commodity Insights
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US TSYS: Off Session Highs With FOMC Minutes, Existing Home Sales & 10Y TIPS Ahead
Nov-21 11:54
- Cash Tsys trade mostly flat but drift to 2bp richer for 30s, having pared earlier gains that had come with a continuation of yesterday’s flattening seen after the strong 20Y auction, if anything, magnified by a relatively well-received round of 20-Year JGB supply in Asia.
- Reported positives surrounding the Israeli-Hamas hostage situation didn’t initially filter into wider markets although have perhaps helped the intraday sell-off.
- TYZ3 at 108-27+ has pulled back near to the day’s lows after earlier breaching yesterday’s high with 109-01+, stopping short of initial resistance at 109-08+ (Nov 17 high). Cumulative volumes are solid at 340k with rolls getting underway.
- Fed Funds implied rates continue to price very little tightening ahead (+1bp over next two meetings) before the first cut in July (cumulative 31bp) and a cumulative 91bp to end-2024.
- Fed: FOMC meeting minutes (1400ET) - MNI preview here.
- Data: Chicago Fed activity Oct (0830ET), Philly Fed non-mfg Nov (0830ET), Existing home sales Oct (1000ET). Existing home sales are expected to show further weakness having already slumped to ~25% below pre-pandemic levels.
- Note/bond issuance: US Tsy $15B 10Y TIPS re-open (91282CHP9) (1300ET)
- Bill issuance: US Tsy $26B 2Y FRN re-open, $75B 41D bill CMB (1130ET)
US 10YR FUTURE TECHS: (Z3) Trend Needle Points North
Nov-21 11:53
- RES 4: 110-07+ High Sep 14
- RES 3: 110-00 Round number resistance
- RES 2: 109-20 High Sep 19
- RES 1: 109-08+ High Nov 17
- PRICE: 108-27+ @ 11:42 GMT Nov 21
- SUP 1: 108-04 50-day EMA
- SUP 2: 107-27+ 20-day EMA
- SUP 3: 107-00 Low Nov 13
- SUP 4: 106-02+ 2.0% 10-dma envelope
Treasuries are unchanged. Short-term bullish conditions remain intact and the contract is trading closer to its recent highs. Price has recently traded above resistance at 108-25, the Nov 3 high. A clear break of this hurdle would signal scope for an extension towards 109-20, the Sep 19 high. Key short-term support has been defined at 107-00, the Nov 13 low. A reversal and a break of this support, would instead highlight a bearish threat.
OPTIONS: TWD, CNY Spot Breakouts Stimulate Solid Hedging Demand
Nov-21 11:51
- FX options volumes were unusually busy for a Monday session, with total notional traded via the DTCC topping $100bln for a second consecutive session. The demand for options coincides with uptick in front-end G10 vols, with CNY, JPY, AUD and NZD 1m vols touching new multi-week highs in Tuesday trade. The exception here is EUR and GBP vols, which remain subdued and close to recent lows.
- Today’s activity has been propped by sizeable trade across TWD options, likely triggered by the sharp multi-day rally in TWD over the past week or so. USD/TWD spot slipped below 31.50 for the first time since early August overnight, helping trigger a wave of vol-hedging evident in several sizeable strangle trades across late Asia/early Europe hours.
- The strengthening of spot CNY above the daily fix has also been accompanied by higher-than-average CNY options volumes, with downside exposure in demand throughout. Close to $3 in USD/CNY puts have traded for every $2 in calls, with 7.12, 7.10 and 7.05 put strikes seeing the most notable interest.
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