OIL: Mid-Day Oil Summary: Crude Steady
Dec-05 12:06
Crude front month futures are holding steady overall and near unchanged on the week. Geopolitical risks for Ukraine and Venezuela are supporting crude but projections for a record market surplus next year remain a concern.
- Brent FEB 26 down 0.2% at 63.13$/bbl
- WTI JAN 26 down 0.3% at 59.49$/bbl
- Ukraine and Russia talks appeared stalled, with Putin emphasizing that several points in the US backed peace plan were unacceptable.
- Saudi Arabia yesterday cut the Arab Light OSP to Asia to the lowest in five year at a $0.6/bbl premium to the Oman/Dubai average, in line with estimates amid persistent signs of a surplus in global oil markets.
- OPEC’s oil output edged lower in November despite higher quotas due to outages in some member countries, according to a Reuters survey on Thursday.
- The Trump administration extended a waiver for Lukoil PJSC's gas stations outside of Russia, allowing them to continue operations until late April 2026.
- Indian state refiners IOC and Bharat Petroleum bought non-sanctioned Russian oil for January and benefited from wider discounts Reuters sources report.
- Russia’s ESPO blend crude oil cargoes loading in December traded at a discount of $5-6/bbl to ICE Brent in Chinese ports, the weakest differential on record, Reuters reports citing four sources.
- Russia plans to raise oil exports from its western ports by 27% in December from November amid excess crude storage buildup and large rollover volumes after bad weather and drone attacks, Reuters reports.
- Crude stockpiling in China, continuing around 900kb/d, will help absorb a global surplus next year, Citigroup said cited by Bloomberg.
- China’s larger allocation of crude imports in the final batch of quotas this year reflects the enforcement of the fuel oil consumption tax and improved refining margins in Q4, Vortexa said.
- Brent could fall to $45/bbl before reaching a floor from physical and paper supply demand adjustments, Macquarie said.
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MNI: US MBA: MARKET COMPOSITE -1.9% SA THRU OCT 31 WK
Nov-05 12:00
- MNI: US MBA: MARKET COMPOSITE -1.9% SA THRU OCT 31 WK
EGBS: OATs The Risk Proxy Of Choice, Limiting Recovery In SPGB/OAT/PGB Fly
Nov-05 11:58
The SPGB/OAT/PGB butterfly is off all-time lows, but the bounce has been limited and has already started to fade as weakness in equity markets weighs on OATs in RV terms.
- OATs have become more of a risk proxy given France’s ongoing fiscal deterioration and political risk premium.
- This contrasts with the positive fiscal dynamics and sovereign rating trajectories for Spain and Portugal, and the clear differentiation continues to hamper French paper on this structure.
- Ongoing French political risks and prolonged Budget uncertainty only deepen downside risks for OATs here, particularly with no clear outcome in sight at this stage.
- Note that the latest local media reports point to French PM Lecornu being set to offer concessions to the Socialist Party in order to advance the social security budget (covered by our political risk team recently), although it is uncertain whether the offer will actually be tabled/accepted.
Fig. 1: 10-Year Spain/France Portugal Butterfly
Source: MNI - Market News/Bloomberg Finance L.P.
OUTLOOK: Price Signal Summary - Gold Support At The 50-Day EMA Remains Exposed
Nov-05 11:51
- On the commodity front, a fresh cycle low last week in Gold highlights an extension of the bear cycle that started Oct 20. The retracement since Oct 20 has allowed an overbought trend condition to unwind. The 20-day EMA has been breached, signalling scope for a test of the 50-day EMA, at $3867.3. Clearance of this EMA would strengthen a short-term bear theme. Initial resistance is at $4161.4, the Oct 22 high.
- WTI futures are unchanged and the contract remains in a corrective cycle for now. Note that price has recently traded through the 50-day EMA, currently at $61.03. The breach of this EMA signals scope for a stronger recovery. Note too that a resistance at $62.34, the Oct 8 high, has also been pierced. A clear move through it would expose key resistance at $65.77, the Sep 26 high. First key support and the bear trigger is unchanged at $55.96, the Oct 20 low.
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