OIL: EIA Oil Stocks Preview: Crude Stocks to Build Again
EIA Oil Inventory Preview: The day delayed EIA weekly petroleum status report will be released at 12:00ET (17:00GMT) today.
- Crude inventories are expected to build by 3.46mbbl, gasoline to draw 0.40mbbl and distillates to draw 1.43mbbl for the week to Feb. 14, a Bloomberg survey average shows.
- US crude inventories rose 4.07mbbl in data last week to extend the trend since mid Jan although levels remain below the five year seasonal average. Stocks increased as production edged higher while both imports and exports were disrupted by fog which could again impact data this week. Crude stocks have been rising due to increased flows from Canada to beat tariff deadlines and planned US refinery maintenance. Cushing stocks showed the largest weekly increase since October but are still below the five year range.
- A Bloomberg survey shows a 0.39 percentage points decline in refinery utilisation this week after rising more than expected to 85% driven by the East Coast, Gulf Coast and Midwest last week.Refinery maintenance in the US is ramping with the start of outages on the West Coast. Approximately 976kb/d of CDU capacity was offline on Feb. 13 while heavy maintenance at PADD-2 has yet to commence, Kpler said. PADD- 2 maintenance is to rise to 680kb/d in the coming month while PADD-3 runs will fall 260kb/d m/min in Feb.
- Distillates stocks were last week 10.8% below the five year average with an increase in exports offset by a big drop in implied demand. The four week average implied demand dipped slightly but remains well above normal after surging higher during January amid cold weather.
- Gasoline stocks fell 3mbbl in data last week with a rise in production offset by higher implied demand and an increase in net exports. The four week average implied gasoline demand edged higher to remain just below the previous five year average.
- The API data yesterday showed a crude build of 3.3mbbl, a Cushing build of 1.7mbbl, a gasoline build of 2.8mbbl and distillates draw of 2.7mbbl.
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GILTS: DMO Consultations Also Factoring Into Bid/Flattening
To add to the recent bullet, a reminder that the minutes of yesterday’s DMO consultations with gilt market participants (released this morning) revealed that there was “GEMM support for "a reduction in the duration of conventional gilt issuance in 2025-26 relative to the current year [...] some attendees cited declining structural demand for gilts from the UK pension sector as a factor in their recommendation to reduce long issuance."
- This, coupled with the removal of hedging pressure surrounding the pricing of the syndicated tap of the Jan-40 line, is likely promoting the recent bid/cure flattening.
BONDS: Dragged Away From Lows By Gilts
The bid in gilts (covered in the previous bullet) seems to help wider core global FI markets off session lows.
- German yields now little changed to 1.5bp lower on the day, while U.S. Tsy yields are 2.5-5.5bp lower.
- Flattening biases also apparent on both curves.
- A reminder that Tsys are playing catch up after the observance of MLK day in the U.S. and resultant closure of cash markets on Monday.
GILTS: Firmer After Syndication Hedging Pressure Abates
Gilts outperform over the last 40 minutes or so, with pricing of this morning’s syndicated tap of the Jan-40 line now in the rear-view and any hedging related pressure passing.
- The offering attracted record demand.
- Futures to fresh session highs above 91.80 at typing, bulls eye resistance at the Jan 17 high (91.96).
- Yields now 2.0-2.5bp lower across the curve, with the long end now outperforming after some modest curve steepening ahead of the supply
