OIL: Oil End of Day Summary: Crude Struggles for Direction
Jun-13 18:16
Crude has struggled for direction today, oscillating between $77.67/b and $78.86/b. Lower-than expected PPI data has been offset by expectations of a delayed start to Fed rate cuts, which could limit demand.
- WTI JUL 24 up 0% at 78.53$/bbl
- The US Fed yesterday held rates steady at its June FOMC meeting, signalling just one cut in 2024 and likely to weigh on demand prospects
- May PPI -0.2% M/M (0.1% expected); core PPI (ex food/energy/trade) 0% (0.3% expected)
- The Trans Mountain pipeline is running around 80% capacity, as 22 oil tankers are scheduled to load in Vancouver in June with crude from the expanded pipeline, Trans Mountain said cited by Reuters.
- Crude loadings from Guyana are planned at 20m bbl, or 645k b/d in August, according to a loading programme seen by Bloomberg.
- Russia intends to compensate for overproduction above its OPEC+ quota through 2025 according to the energy ministry Thursday.
- Russia is changing how oil output data used to compile OPEC+ production estimates is reported, according to Bloomberg, amid greater scrutiny over production cuts.
- Russia’s President Valdimir Putin extended a special economic decree linked with preventing some foreign states from accessing Russian oil and products until December 31, according to Interfax.
- The UK announced wide ranging sanctions on Russia, including a first attempt to crack down on the shadow fleet of tankers moving Russia’s oil, according to Bloomberg.
- OPEC does not see a peak in oil demand in its long-term forecast and expects demand to increase to 116m b/d or higher by 2045, its secretary general Hathaim Al Ghais said, cited by Reuters.
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CANADA: 2Y Can-US Yield Differentials Set For Sixth Consecutive Increase
May-14 18:15
- GoC yields sit between 2bp lower (2s) to 0.5bp higher (30s) on the day, on track for the sixth consecutive day of underperformance to Tsys for the front end.
- It sees the 2Y Can-US yield differential at -56bps (+1.8bps on the day) for a fresh high since Apr 9 whilst the 10Y is at -77bps (+3.4bps) for its highest since Apr 4.
- Locally, wholesale sales fared better than expected (ex petroleum etc. -1.1% M/M vs cons -1.3%, and with a mild upward revision) but shouldn’t have been a big mover.
- Tomorrow sees US CPI in focus, with very much secondary factors from Canadian housing starts, manufacturing sales and existing home sales.
- BoC-dated OIS is little changed for near-term meeting with 10-11bp of cuts for June and just shy of 25bp cuts for July. CORRA futures show 60bp of cuts for 2024 contracts.
US: Presidential Race Swings Towards Trump Amid Concerning Polling For Biden
May-14 18:14
The 2024 presidential election race has swung towards former President Donald Trump amid new polling from the New York Times/Siena College which gave Trump a sizable lead over Biden in 5/6 key battleground states.
- In addition, President Biden’s approval rating has slumped again - reversing a moderate recovery after his well-received State of the Union Address in March, according to the 538 tracker. Biden’s approval rating of 38.1% is significantly lower that the 40% benchmark which is considered a useful gauge of an incumbent president’s successful re-election.
- For context, the RealClearPolitics tracker, which notes Biden at a firmer 39.5%, highlights the approval rating of previous presidents at the same time in their respective presidencies: “Approval May 14th (4th Year): Biden 39.5 | Trump 45.6 | Obama 48.3 | Bush 45.6.”
- Axios reports that, “President Biden doesn't believe his bad poll numbers — and neither do many of his closest advisers,” noting that Biden told donors last week: "While the press doesn't write about it, the momentum is clearly in our favor, with the polls moving towards us and away from Trump."
- For the first time since late March betting markets now see Trump as the favourite to win after an extended period where Trump and Biden were running in a dead heat. According to Smarkets, Trump has an implied probability of 50% of winning - the highest implied probabilty Trump has recorded since entering the race.
Figure 1: President Biden Approval Rating
Source: 538
Figure 2: 2024 Presidential Election Winner
Source: Smarkets
EURGBP TECHS: Short-Term Bull Cycle Remains In Play
May-14 18:00
- RES 4: 0.8665 61.8% retracement of the Nov 20 - Feb 14 bear cycle
- RES 3: 0.8652 1.0% 10-dma envelope
- RES 2: 0.8645 High Apr 23 and the bull trigger
- RES 1: 0.8618/21 76.4% of the Apr 23 - 30 sell-off / May 9 high
- PRICE: 0.8598 @ 15:58 BST May 14
- SUP 1: 0.8567/31 50-day EMA / Low Apr 30 and the bear trigger
- SUP 2: 0.8521/8504 Low Apr 17 / Low Mar 8
- SUP 3: 0.8498/93 Low Feb 14 / Low Aug 23 2023 and key support
- SUP 4: 0.8454 76.4% of the Mar 7 - Sep 26 ‘23 bull phase
EURGBP traded higher again last week to undermine the recent bearish theme. This strengthens a developing short-term bullish condition. A continuation higher would open 0.8645, the Apr 23 high and a key short-term resistance. Clearance of this hurdle would highlight an important technical break. Initial support to watch is 0.8567, the 50-day EMA.
