OIL: Crude Range Trading, Monitoring Tariff & OPEC Developments
Oil prices are little changed during today’s APAC session holding onto Wednesday’s losses given lacklustre risk sentiment with mixed equities and lower commodity prices. Crude has been in a narrow range of less than 50c/bbl. WTI is up 0.1% to $62.36/bbl after an earlier high of $62.54. Brent is +0.1% to $66.21 following today’s peak of $66.40. Benchmarks are likely to remain sensitive to US tariff developments given the consequences for global energy demand. The USD index is down 0.1%.
- There were Reuters reports yesterday that OPEC is under pressure from within to increase output materially again in June, which pushed prices lower. The group meets on May 5 to discuss quotas at a time of lax compliance.
- Politico reported that the White House is considering lifting sanctions on Russia’s Nord Stream 2 gas pipeline but Secretary of State Rubio said that the suggestion is “unequivocally false” and he hadn’t spoken with Middle Eastern envoy Witkoff about easing Russian sanctions and that was not part of talks on a Ukraine deal.
- Later the Fed’s Kashkari speaks. US March orders, Chicago Fed index, April Kansas manufacturing index and jobless claims print. The ECB’s Lane participates in a panel and Germany’s April Ifo survey is published.
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JGBS: Cheaper, Gov Ueda Discusses BoJ Asset Holdings
JGB futures are weaker and hovering near session lows, -34 compared to settlement levels.
- * (MNI) BoJ board members expressed caution at the January 23-24 meeting, which saw the policy rate increase 25 basis points to 0.50%, with gradual hikes touted as the most preferred path, the published minutes showed Tuesday.
- “BoJ Governor Ueda says the central bank will take into account market conditions and assess appropriate pricing when it creates a plan for how to divest its holdings of ETFs and J-REITs. The decline in the BoJ’s JGB holdings has been extremely gradual, Ueda said when asked about the impact on bond yields stemming from the BoJ’s efforts to reduce such holdings.” (per BBG)
- “Japanese Prime Minister Shigeru Ishiba plans to draw up “powerful” measures to mitigate the impact of inflation.” (per Kyodo via BBG)
- Cash US tsys are slightly richer in today's Asia-Pac session after yesterday's heavy session.
- Cash JGBs are flat to 3bps cheaper across benchmarks, with the belly underperforming. The benchmark 10-year yield is 2.8bps higher at 1.573% and just shy of the cycle high of 1.584%.
- Swap rates are 1-2bps higher, with swap spreads mixed.
- Tomorrow, the local calendar will see PPI Services and Coincident/leading Indices data.
AUSSIE BONDS: Cheaper But At Session Bests Ahead Of Federal Budget
ACGBs (YM flat & XM -2.5) are slightly weaker but Sydney session highs on a data-light session.
- Today we will see the Federal Budget presented around 1930 AEDT. A Federal Election is likely to be called soon after. The Budget is expected to show deficits across the forecast horizon with additional expenditure likely in an attempt to win votes.
- Cash US tsys are slightly richer, with a steepening bias, in today's Asia-Pac session after yesterday's heavy session.
- Cash ACGBs are flat to 2bps cheaper with the AU-US 10-year yield differential at +9bps.
- Swap rates are 1-2bps higher.
- The bills strip is -1 to -2 across contracts.
- RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in April is given a 3% probability, with a cumulative 66bps of easing priced by year-end (based on an effective cash rate of 4.09%).
- Tomorrow, the local calendar will see February CPI data. It is the middle month of the quarter and so will include updates to services components. Headline is forecast to be steady at around 2.5%. The trimmed mean printed at 2.8% in January.
- The AOFM plans to sell A$800mn of the 3.50% 21 December 2034 bond tomorrow and A$700mn of the 1.25% 21 May 2032 bond on Friday.
OIL: Crude In Narrow Range As Market Struggles With Direction Given Uncertainty
Oil is little changed during today’s APAC session as the market range trades given the highly uncertain outlook but holds onto Monday’s gains. While OPEC and the US plan to increase output, tighter sanctions on Iran and Venezuela could reduce it. Peace in Ukraine looks a long way off and with it an easing in restrictions on Russia. The market is concerned that increased protectionism will weigh on global demand but there is now talk that reciprocal tariffs will be targeted rather than broadly applied.
- WTI is steady at $69.08/bbl after falling to $69.02, while Brent is around $73.00/bbl following a low of $72.92. The USD index has also been range trading and is down slightly.
- US President Trump signed an order to charge importers of Venezuelan oil and gas a 25% “secondary” tariff from April 2, whether it comes indirectly or directly. This is likely to hit China and India significantly. The order gives Secretary of State Rubio discretion though. It accounts for just under 1% of global output, according to Bloomberg.
- The US itself buys Venezuelan heavy crude used in Gulf Coast refineries. The US’ Chevron has had its licence to produce there extended to give it more time to wind down its operations.
- Last week the market was reassured by another US product stock drawdown even though crude rose again, as it signalled solid demand. Today US industry-based inventory data is released.
- Later the Fed’s Kugler and Williams speak and US January/February housing data, March consumer confidence & Richmond Fed business conditions and March German Ifo survey are released.
