OIL PRODUCTS: Europe’s Refiners Unlikely to See Margin Boost: Argus
Dec-23 13:24
Around 400k b/d of European refinery capacity, or 3% of the region’s total, is expected to close permanently in 2025, although a boost for the margins is likely to be short-term, Argus said.
- Outside of Europe, the world has added more than 2.5m b/d of CDU capacity in the last three years, more than offsetting for the region’s decline.
- Refinery closures tend to support margins for those that remain, but European refiners’ costs continue to rise while demand for their products falls.
- Simpler and smaller refineries are prime candidates for further closures as they usually have weaker margins.
- An ongoing concern for European refiners is the trend towards lighter and sweeter crude slates, resulting in higher naphtha yields at a time when the petrochemical sector is under pressure.
- If Dangote continues to shrink Nigeria’s demand for gasoline imports, refineries that cannot desulphurise gasoline output to 10ppm will be hit the hardest.
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AUSSIE 3-YEAR TECHS: (Z4) Bearish Backdrop Building
Nov-22 22:45
- RES 3: 96.380 - High Mar 21 2023
- RES 2: 97.190 - High May 5 2023
- RES 1: 96.730/932 - High Sep 17 / 76.4% of Mar-Nov ‘23 bear leg
- PRICE: 95.920 @ 16:46 GMT Nov 21
- SUP 1: 95.760 - Low Nov 13
- SUP 2: 95.750 - Low 27 Nov ‘23
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Prices hit a fresh pullback low at 95.760 across the global rates sell-off, extending losses on the break through 96.080 support. This confirms the downside bias, with support undercutting at 95.750 below ahead of major support of 95.480. For any corrective recovery to take hold, markets need to retake the 96.00 handle on a closing basis.
US TSYS: Underperforming Global Peers In Twist Flattening Move
Nov-22 20:10
Treasuries closed Friday little changed, underperforming global peers.
- Futures traded within Thursday's ranges, with data having little lasting impact: November flash services PMI was much stronger than expected and the highest since March 2022, though soft employment and output price inflation metrics softened the impact.
- Elevated final November UMichigan survey long-term inflation expectations saw Treasuries hit the worst levels of the day, but the move reversed.
- The limited move in yields stood in contrast to pronounced gains in Europe, where weaker-than-expected PMIs renewed concern over regional growth and boosted ECB rate cut pricing. That helped boost Treasuries in overnight trade, but as noted, the US rate move subsided.
- Futures volumes remained robust (2.4M TYZ4), though again it was largely quarterly roll-related.
- The curve twist flattened on the day, and Friday's moves left 10Y yields just 2bp lower on the week.
- Latest levels: The Dec 24 T-Note future is up 5/32 at 109-21, having traded in a range of 109-16.5 to 109-26.5. 2-Yr yield is up 1.8bps at 4.3665%, 5-Yr is down 0.9bps at 4.2948%, 10-Yr is down 1.8bps at 4.4041%, and 30-Yr is down 1.1bps at 4.5906%.
- MNI's weekly US macro wrap is here (PDF).
- Next week's schedule is condensed by the Thanksgiving holiday, with highlights including FOMC Minutes (MNI Preview here - PDF) and GDP/PCE data.
OPTIONS: US Options Summary
Nov-22 19:59
Friday's US rates/bond options flow included:
- SFRZ4 95.50/95.56/95.62c fly, bought for 0.75 in 5k total.
- SFRF5 95.75/95.62/95.50p fly, bought for 3 in 5k.
- SFRM5 96.50/97.00cs, sold at 5.25 in 8k.
- SFRM5 97.00/97.50c strip vs SFRZ5 97.50c, bought the strip for flat in 5k
- SFRZ5 96.125 ^ sold at 87.5 in 500
- 2QH5 97.25/97.50cs, bought for 1.5 in 5k
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