DIESEL: Diesel Backwardation and Cracks Remain Strong Amid Sanctions Risk
Jan-17 11:36
ICE Gasoil front month is holding near the highest since July and US diesel crack spreads are the highest since March as supply concern are still priced into diesel markets following the latest US sanctions on Russia.
- The prompt ICE Gasoil time spread is back up to $7.5/mt although below the peak of $8.75/mt seen at the start of this week.
- The Jan25-Dec25 spread remains strong at $24.25/mt after reaching the highest since April at $27.75/mt on Jan. 13.
- The diesel market was already in backwardation with support from cold weather in the northern hemisphere.
- At least 150kbpd of Russian diesel exports from Gazprom Neft and Surgutneftegas refineries are at risk due to sanctions, Energy Aspects said.
- Markets are pricing higher crude costs into fuel prices and refining runs with no big impact on Asian markets directly while the market would eventually adapt to the new sanctions, Reuters sources suggested.
- US distillate stocks were last week 4.3% below the five year average, Singapore Middle Distillates inventories are 6.4% below although European ARA Gasoil stocks are 16.9% above normal.
- Gasoil FEB 25 up 0.7% at 759.5$/mt
- ULSD FEB 25 up 0.2% at 2.62$/gal
- Gasoil FEB 25-MAR 25 up 0.25$/mt at 7.25$/mt
- Gasoil JUN 25-DEC 25 up 0.75$/mt at 23.75$/mt
- EU Gasoil-Brent up 0$/bbl at 19.54$/bbl
- US ULSD crack down 0.1$/bbl at 31.09$/bbl
Source: Reuters
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Historical bullets
GILTS: The 2024 high in Yield could come into Play
Dec-18 11:34
- UK, and broader Investors will be keeping a close eye on the Govies and rate markets in the UK, while Market movements in EGBs and the US are contained, Gilt has managed a two way 67 ticks range for today.
- As we just noted earlier, technically the contract had a brief test through the 92.78 Fibbo retracement support, but the more interesting area should be eyed at 92.53.
- This 92.53 support is unrelated to the March expiry, it was the G Z4 low, when the 10yr Yield attempted a test through 4.60%.
Note that for today, reference 92.82 in G H5 rounding up the Yield:
- 4.60% = 92.38 (printed a 4.594% high in 2024).
US 10YR FUTURE TECHS: (H5) Bear Threat Remains Present
Dec-18 11:26
- RES 4: 112-02 Low Oct 14
- RES 3: 111-24 38.2% retrace of the Sep 11 - Nov 15 bear leg
- RES 2: 111-04+/111-20+ 50-day EMA / High 6 and the bull trigger
- RES 1: 110-17+ 20-day EMA
- PRICE: 109-24+ @ 11:15 GMT Dec 18
- SUP 1: 109-17 Low Dec 17
- SUP 2: 109-02+ Low Nov 15 and the bear trigger
- SUP 3: 109-00 Round number support
- SUP 4: 108-28 1.236 proj of the Oct 1 - 14 - 16 price swing
A bearish short-term theme in Treasury futures remains intact despite yesterday’s bounce. 109-22, 76.4% of the Nov 15 - Dec 6 upleg, has been pierced. A continuation lower would expose 109-02+, the Nov 15 low and key support. It is still possible that the latest pullback is a correction. Initial resistance to watch is 110-17+, the 20-day EMA. A break of this average would highlight an early bullish development.
STIR: 25bp Fed Cut Seen Locked In Today, Shallow Path Thereafter
Dec-18 11:25
- Fed Funds implied rates are little changed overnight, with a 25bp cut today seen as locked in (24bp priced) but a subsequent 25bp cut only fully priced for the June FOMC.
- Cumulative cuts from 4.58% effective: 24bp Dec, 28bp Jan, 40bp Mar, 47bp May and 56bp June.
- Further out, the SOFR-implied terminal of ~3.85% (broadly 75bp of cuts including today’s) continues to point to a markedly shallower easing cycle than the 2.75-3% median dot in the September SEP.
- The median analyst sees the FOMC rate “dot” for 2025 upped by 25bp (i.e. one less cut) to 3.6%, with a range of opinions including unchanged at 3.4% and +50bp to 3.9%. Analysts are almost unanimous that the longer-run Dot will be raised from 2.9%, to either 3.0% or 3.1%.
- MNI Fed Preview: https://media.marketnews.com/Fed_Prev_Dec2024_With_Analysts_5b1eec4e36.pdf
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