OIL: Oil Summary At European Close: Crude Rises
Jun-19 15:07
Crude is higher on the day as focus remains on the uncertain situation in the Middle East. An Iranian official raised the prospect of closing the Strait of Hormuz in response to aggression, adding to supply risks, while the market waits to see if the US will act directly in the conflict.
- Brent AUG 25 up 2.2% at 78.42$/bbl
- WTI JUL 25 up 2.6% at 77.06$/bbl
- Currently the main impact on oil from the conflict is on shipping but concerns are heightened that supply could be more severely impacted if Israel strikes Iran’s main export hubs or if Iran blocks the Strait of Hormuz.
- US President Trump said on Wednesday that he has approved a plan but is still hoping that Tehran will agree to abandon its nuclear programme. However, supreme leader Khamenei said they would “never surrender” in response to Trump’s demand for an unconditional surrender.
- Goldman Sachs is assuming that the geopolitical risk premium on Brent is around $10/bbl, according to Bloomberg, but with a base case for oil to fall to $60/bbl in Q4 assuming no supply issues.
- U.S intervention in the Israel/Iran conflict raises the prospect of risks to oil supplies in the region according to RBC’s Head of Global Commodity Strategy Helima Croft speaking on CNBC.
- If Iranian exports are reduced by half, crude prices could rise to $85/bbl, according to Barclays cited by Reuters.
- Iran is maintaining crude oil supply by loading tankers one at a time and moving floating oil storage much closer to China, two vessel tracking firms told Reuters.
- Oil consumption saw a downturn this week amidst subdued air travel volumes in the US, according to JPMorgan.
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OPTIONS: Expiries for May21 NY cut 1000ET (Source DTCC)
May-20 15:04
- EUR/USD: $1.1140-50(E1.3bln), $1.1200(E809mln), $1.1250(E1.1bln), $1.1270(E500mln), $1.1390-05(E2.1bln)
- USD/JPY: Y142.00($878mln), Y144.50($610mln)
US SWAPS: Swap Spreads Struggling To Rally After Moody's Downgrade
May-20 14:53
Long end swap spreads are still struggling to rally, despite Tsys moving away from session lows after the House Freedom Caucus Chair noted that “we are still a long ways away” from agreement on the ‘One Big Beautiful Bill’.
- 10- & 30-Year swap spreads hover close to yesterday’s lows.
- Swap spread bulls will continue to point to heightened potential for SLR reform, with the matter clearly a front of mind subject for the likes of Treasury Secretary Bessent.
- However, the seemingly structural cheapening of Tsys vs. swaps in light of Moody’s late Friday sovereign credit rating downgrade of the U.S. means that any rally driven by subsequent SLR reform is likely to result in a slightly lower peak for swap spreads than would have otherwise been the case.
US: Freedom Caucus Still "Long Ways Away" On Megabill Following Trump Address
May-20 14:52
Representative Andy Harris (R-MD), the chair of the conservative House Freedom Caucus, told reporters "we’re still a long ways away" from an agreement with Republican leadership on the 'One Big Beautiful' reconciliation bill, following an address from US President Donald Trump.
- Harris said "he’s still a no", citing “waste, fraud and abuse” in Medicaid, per Punchbowl News. He added that he thinks "we can get there" but said, "maybe not by tomorrow,” which is when House Speaker Mike Johnson (R-LA) has teed up a key procedural vote in the House Rules Committee.
- Erik Wasson at Bloomberg reports similarly that Trump, "didn’t change [Harris'] view" as the bill doesn’t cut spending enough. "He’s still a hard no!!"
- Trump singled out Rep Thomas Massie (R-KY) as a "grandstander", saying he could never get his vote. Reminder: Johnson can likely only drop three votes in a final vote on the package.
- Trump also reportedly rebuked blue-state Republicans holding out for a higher cap on State and Local Tax (SALT) deductions. He told Rep Mike Lawler (R-NY): “I know your district better than you do, if you lose because of SALT you were going to lose anyway.”
- The White House has published a fact sheet with 20 reasons why Congress should get behind the bill here.
- The House Rules Committee is scheduled to gavel in at 01:00 ET 06:00 BST tomorrow morning. If the package is advanced out of the committee, a final vote is possible tomorrow. If the bill stalls in Rules, lawmakers are in for an extended session before being released by Johnson for recess.
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