OIL: Mid-Day Oil Summary: Crude Set for Weekly Decline
Dec-20 12:27
Crude front month extends the weekly decline under pressure from the potential for less US Fed rate cuts next year, bearish sentiment from mixed Chinese data and 2025 oversupply fears. However, crude curve backwardation remains strong suggesting supplies remain tight after the OPEC+ delay and with supply risks due to increased sanctions on Russia and Iran.
- China’s November imports of crude oil from Malaysia and Russia fell from the previous month as imports from Saudi Arabia and Iraq increased, according to General Administration of Customs data.
- The volume of Iranian oil on tanker at sea seven days or more has risen to the highest since late July at 16.82mbbl as of Dec. 15, as increasing US sanctions disrupt flows to China according to Kpler cited by Bloomberg.
- U.S. crude exports to Europe are expected to fall in January after Kpler data showed a record high of 771kb/d US exports to ARA in November, according to Reuters. The WTI / Brent spread has narrowed this week to the closest spread since October 2023 at -$3.39/bbl.
- Norway’s oil production dipped to 1.736mbpd in November from 1.781mbpd October but was 3.2% higher than the official forecast of 1.682mbpd.
- Brent FEB 25 down 0.8% at 72.28$/bbl
- WTI FEB 25 down 0.9% at 68.74$/bbl
- WTI-Brent down 0.13$/bbl at -3.54$/bbl
- Brent FEB 25-MAR 25 down 0.03$/bbl at 0.4$/bbl
- Brent JUN 25-DEC 25 down 0.08$/bbl at 1.39$/bbl
- US gasoline crack up 0.4$/bbl at 12.02$/bbl
- US ULSD crack down 0.3$/bbl at 24.39$/bbl
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OUTLOOK: Price Signal Summary - Bear Threat In Bund Futures Remains Present
Nov-20 12:15
- In the FI space, Bund futures yesterday traded in a volatile manner today. Short-term gains are considered corrective. The trend direction is down and the Nov 6 break lower reinforces this theme. The 131.00 handle has been cleared, opening 129.99, a 1.236 projection of the Oct 1 - 10 -16 price swing. Resistance points at 132.34, the 20-day EMA, and 132.89, the 50-day EMA, have been pierced. A clear break of both EMAs would highlight a stronger reversal.
- The trend condition in Gilt futures remains bearish and the latest shallow recovery appears to be a correction. The contract has recently breached 92.99, a 2.00 projection of the Sep 17 - 30 - Oct 1 price swing. This signals scope for an extension towards 92.23, the 2.236 projection. Initial firm resistance to watch is 94.73, Nov 1 high.
US DATA: Slide In Mortgage Applications Pauses Despite Higher Rates
Nov-20 12:11
- MBA composite mortgage applications increased 1.7% (sa) last week after 0.5% the week prior, showing some marginal resilience after previously large declines in refi-applications in particular following the bounce in mortgage rates.
- New purchase applications increased 2.0% after 1.9% whilst refis increased 1.8% after -1.5%. They do however remain -9% and -54% below early Oct/late Sep recent highs respectively.
- The 30Y conforming mortgage rate increased another 4bps to 6.90% in the latest week, up 76bps from the September lows around 6.14%.
ECB: Few New Signals Provided By de Guindos To Bloomberg TV
Nov-20 12:11
ECB Vice President de Guindos provided few new signals in an interview with Bloomberg TV. He re-iterated that the ECB is likely to “continue reducing the restriction of our monetary-policy stance over the next months and quarters”, but still cautioned the need for a “prudent” approach.
- De Guindos has made several appearances since the October decision, but has not provided any major deviations from the bank’s central guidance.
- This is relatively unsurprising given his seniority amongst policymakers and his (relative) focus on financial stability.
- He previously stated on Nov 6 that the ECB would not react immediately to the threat of increased US protectionism following Donald Trump’s election victory: “What we will do is we will incorporate into our projections the trade policy that is announced by the new US administration. And we will take into consideration all the elements”.
