MNI: MNI Test, Please Ignore

After falling earlier in the week on renewed excess supply worries, crude rose 1.2% on Wednesday boosted by the Fed cutting rates, which is supportive of energy demand, but also the US seizure of a tanker off the coast of Venezuela, with 2mn barrel capacity, which according to the US attorney general was carrying sanctioned crude from Venezuela and Iran. Thus geopolitics are impacting oil markets again but Thursday sees OPEC and IEA reports released, which could refocus it on fundamentals.

• The US has been taking action against Venezuela due to its drug shipments and Maduro’s autocratic regime. The appropriation of the tanker is likely to dissuade other shippers from carrying Venezuelan crude reducing global supply. China is the main buyer of Venezuelan and Iranian oil.
• Although shipments have risen through 2025, Venezuela was only the 17th largest exporter in 2023, according to the IEA, despite having the largest known reserves.
• Chevron said that its Venezuelan operations have been unaffected by the latest developments. President Trump has been pressuring the company to reduce its operations in the country and discussions continue.
• WTI rose 1.2% to $58.96/bbl but is still down 1.9% this week. It fell to $57.66 and then rallied to $59.05, below resistance at $61.84, but struggled to hold the break above $59. It is currently around $58.85. Short-term gains continue to be seen as corrective with a bearish threat present. The bear trigger is at $55.99, 20 October low.
• Brent is up 1.1% to $62.64 but 1.7% lower this week. It rose to $62.73 after an intraday low of $61.35. The benchmark remains in a downtrend with the bear trigger at $59.33. It failed to breach resistance at $65.25, 24 October high, on Wednesday.
• EIA reported a 1.81mn barrel US crude drawdown last week but products rose with gasoline up 6.4mn, highest since end December 2024, and distillate 2.5mn. Refining utilisation rose 0.4pp to 94.5%, 2.1pp above same time last year. It is usual for product inventories to be built up through December/January. 

In post-Tokyo trade, JGB futures closed sharply stronger, +23 compared to settlement levels, after US tsys finished with a bull-steepener following the FOMC decision.

• The FOMC delivered what was widely anticipated to be a "hawkish cut" at the December meeting, lowering the Funds rate range by 25bp to 3.50%-3.75% while portraying a cautious stance on further adjustments in the Statement and Dot Plot.
• That said, Powell had a dovish impact on US rates, reversing what appeared to be a hawkish rhetoric building ahead of the FOMC.  Investors were concerned that future interest rate cuts would be in doubt.  This concern saw 2-year yields increase each day for 4 days before the decision.
• Market pricing for a Dec hike is off recent highs, while BBG notes: " Bank of Japan Governor Kazuo Ueda's policy path may include as many as four rate increases by 2027, with three more coming after a widely anticipated move next week, according to a former executive director." The central bank outcome is due next Friday.
• Today, the local calendar will see BSI Survey, International Investment Flow and Tokyo Avg Office Vacancies data alongside 20-year supply (see chart).

Source: Bloomberg Finance LP

• RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
• RES 2: 95.960 - High Apr 7 (cont.)
• RES 1: 95.900 - High Oct 17
• PRICE: 95.210 @ 16:01 GMT Dec 10
• SUP 1: 95.170 - Low Dec 10
• SUP 2: 95.166 - 2.0% Lower Bollinger Band
• SUP 3: 94.359 - 1.0% 10-dma envelope

Aussie 10-yr futures remain well toward the bottom of the recent range, having taken out all major support levels in the process. With 95.275 cleared, prices are pushing to new contract lows, opening vol-band support through 95.166 and into 95.166. Any recoveries need to break back above 95.900 to signal near-term bullish traction.