OIL: Crude Continues Trending Higher, Near-Term Supply Risks
Oil prices rose around a percent on Tuesday on increased demand for heating fuel from cold weather in the US and Europe, and possible tightening of the oil market from frozen US crude facilities. Also China’s eastern ports receiving imports from Iran were asked not to allow US-sanctioned vessels to dock. The USD index rose 0.1%.
- WTI rose 1.2% to $74.45/bbl to be 3.8% higher this month. It fell to $73.11 and then trended up to a high of $74.53, close to resistance at $74.99. The bull trigger is at $76.41. The relative strength index continues to flash overbought though and initial support is at $71.79.
- Brent has broken above $77 after rising 1.0% to $77.04/bbl. After a low of $75.91 it rallied to reach $77.28, approaching resistance at $77.50, January 6 high. Key resistance is at $79.50. Initial support is at $74.72, January 2 low.
- Saudi, Oman and Dubai have all increased prices of shipments to Asia as the region shifts away from Iranian and Russian crude to comply with US sanctions especially on shadow shipping. Bloomberg observed that data showed Russian output in December was lower than its OPEC quota.
- Bloomberg reported that there was a US crude stock drawdown of 4.0mn barrels, more than expected, according to people familiar with the API data. They fell 3.1mn barrels at Cushing last week. Product inventories continued to rise though with gasoline up 7.3mn and distillate +3.2mn. The official EIA data is published later today.
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MNI UST Issuance Deep Dive: Dec 2024 (2/2)
Throughout November’s policy and market volatility, though, Treasury auctions largely impressed, with 5 of 7 nominal coupon sales trading through.
- Auction Results: November’s nominal coupon auctions were generally strong, with five out of seven auctions trading-through, of which four saw a positive reading on MNI’s Relative Strength Indicator (RSI). The remaining two auctions; 3 and 20-year auctions tailed. See page 2.
- Upcoming Supply: Issuance resumes next week with sales of $58B in 3Y Note, $39B in 10Y Note (reopen), and $22B in 30Y Bond (reopen). December is set to see $15B in nominal Treasury coupon sales, in addition to $22B in 5Y TIPS and $28B FRN for a total of $365B – slightly below the Oct and Nov totals of $369B which were joint-highest since Oct 2021.
- MNI's review includes a calendar of upcoming auctions and buyback operations.
US TSYS/SUPPLY: MNI UST Issuance Deep Dive: Dec 2024 (1/2)
MNI's latest US Treasury Issuance Deep Dive has just been published (PDF link here):
November proved a dramatic month for Treasuries. Yields were volatile before and after the Nov 5 election - after ending October at 4.28%, 10Y yields peaked at five-and-a-half-month high just above 4.50% mid-month before closing November just below 4.18%, as markets attempted to price in the implications of a Republican “sweep”.
- Also buffeting rates was speculation over the would-be successor to Treasury Secretary Yellen. President-elect Trump’s selection of hedge fund manager Scott Bessent was greeted with bull flattening in the curve, implying perhaps that he’s seen as more cautious on fiscal deficits than some of the alternatives (he has expressed support for halving the annual budget shortfall to 3% of GDP).
- The first quarterly Refunding process of Bessent’s Treasury is in early February, by which point we may start to have a better sense of the incoming administration’s approach to both fiscal policy and to more issuance-specific considerations such as duration management.
- Bessent for instance has argued that Yellen’s Treasury erred from a risk management perspective by boosting short-duration issuance, and there are suggestions he would be in favor of reversing course, telling Bloomberg in June “When rates are very low, you should extend duration…I think it’s very unfortunate what Secretary Yellen’s doing. She’s financing at the front end, and she’s making a bet on the carry trade, which is not good risk management.”
US LABOR MARKET: MNI US Employment Insight: Soft Enough To Keep Fed Cutting
Our latest Employment Insight has just been published and emailed to subscribers.
