OIL: Oil End of Day Summary: Crude Drops
Jan-23 19:16
WTI is headed for close trading lower, having plunged following Trump’s speech at Davos where he called on OPEC to lower oil prices.
- WTI MAR 25 down 1% at 74.67$/bbl
- EIA, week ending 1/17: Crude oil: -1.0M, Domestic prod: 13.477MMbpd, Cushing: -0.1M
- Trump said that he would ask Saudi Arabia and other OPEC members to “bring down the cost of oil,” predicting that action by the bloc could decrease inflation and allow for the reduction of interest rates.
- Trump in Davos: “But if you don’t make your product in America, which is your prerogative, then very simply you will have to pay a tariff. Differing amounts but a tariff that will direct hundreds of billions of dollars and even trillions of dollars into our Treasury to strengthen our economy and pay down debt.”
- Liam Denning notes that President Trump’s threat of sweeping tariffs against Canada fits with his desire for US “energy dominance” in theory. In practice, the drive for dominance has relied heavily on Canadian oil.
- Tighter global supply concerns due to sanctions on Russia and Iran are still providing support as Asian buyers look to non-sanctioned Middle East barrels and driving up shipping costs. Some Asian refineries are looking to reduce output due to narrower margins.
- US president Donald Trump’s threats of 25% tariffs on Canadian crude, would prompt USGC refiners to look for alternatives, TD Securities said.
- Updates from shipping firms show continued reluctance to return to Red Sea transits, although early signs of increasing interest have emerged.
- India’s crude oil imports in December rose by 1.5% year on year to 19.99m tons compared to 19.07m tons in November
- Angola’s Sonangol issued its first offers for the March loading programme Jan. 23, Reuters said.
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Historical bullets
LOOK AHEAD: Thursday Data Calendar: Weekly Claims, Tsy Bills & 7Y Note Sale
Dec-24 18:38
- US Data/Speaker Calendar (prior, estimate)
- Dec-26 0830 Initial Jobless Claims (220k, 223k)
- Dec-26 0830 Continuing Claims (1.874M, 1.881M)
- Dec-26 1130 US Tsy $75B 4W, $70B 8W bill auctions
- Dec-26 1300 US Tsy $44B 7Y Note auction & $64B 17W bills
STIR: FED Reverse Repo Operation
Dec-24 18:24
RRP usage climbs to $180.989B this afternoon from $116.004B yesterday. Compares to $98.356B last Friday - the lowest level since mid-April 2021. The number of counterparties climbs to 52 from 47 prior.
US TSYS: Late Session Rebound, Post-Auction Short Sets Unwound
Dec-24 18:19
- Treasury futures look to finish Tuesday's shortened Christmas-eve session near session highs, TYH5 +2.5 at 107-17 vs. 108-19 high, after trading much of the session weaker. The 10Y contract had breached a couple levels of technical support on it's way down to 108-09.5 low, 10Y yield climbing to 4.8160% high last seen in late May.
- Rates recovered soon after the $70B 5Y note auction (91282CMD0) stopped 0.2bp through (second consecutive stop since June): drawing 4.478% high yield vs. 4.480% WI; 2.40x bid-to-cover vs. 2.43x for the prior auction.
- The bounce helped projected rate cuts into early 2025 look steady to slightly higher vs. this morning (*) as follows: Jan'25 steady at -2.1bp, Mar'25 at -12.6bp (-11.7bp), May'25 -17.2bp (-16.7bp), Jun'25 -24.6bp (-23.1bp).
- No substantive reaction to regional Fed data:
- -6.0 reading for December's Philadelphia Fed's Nonmanufacturing current regional activity index (-2.4 expected) represented a steady outturn from -5.9 prior, and suggested a regional services sector that remained "weak", per the report.
- Richmond Fed's regional manufacturing survey index came in in at -10 as expected in December, the best reading since June (-14 prior). The shipments and employment subindices were flat, but new orders saw a solid improvement to -11 from -19 prior.
- Markets closed for Christmas holiday Wednesday, Globex pre-open Wednesday evening at 1700ET/re-open at 1800ET. Full sessions Thursday & Friday.
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