OIL: Oil Summary At European Close: Crude Slightly Lower
Oil prices have eased back today as the market awaits Iran’s response to US strikes over the weekend.
- Brent AUG 25 down 0.9% at 76.32$/bbl
- WTI AUG 25 down 1% at 73.08$/bbl
- Concerns are that a further escalation in the conflict could significantly impact oil infrastructure and exports from the region.
- Iranian TV reported that parliament voted to close the Strait of Hormuz but Bloomberg notes that would ultimately require Ayatollah Khamenei’s approval.
- The Greek government warned its shipping to reassess the need to travel through Hormuz and suggested vessels wait for clarification, according to Bloomberg.
- Shipping rates have risen, and some firms are not taking new bookings. Two tankers had to reverse course and head south again as they entered Hormuz as the US attacked Iran.
- Goldman Sachs believes that if seaborne traffic through Hormuz were halved then Brent could briefly reach $110/bbl, reported by Bloomberg.
- The outlook for transport in the Strait of Hormuz is far from a “full closure or nothing” scenario, according to RBC Capital Markets cited by Bloomberg.
- India’s crude oil imports in May rose by 5.9% year on year to 23.32m tons and compared to 21.23m tons in April, according to government data.
- Oil demand in JODI-reporting countries rose by 1.58 mb/d on the month in April and up 1.7 mb/d year on year. Crude oil production increased by 202 kb/d from March and 1.2 mb/d higher vs April 2024.
- The call skew in Brent and WTI options markets has eased but remains strong overall as markets assess supply risks after US strikes on Iran over the weekend.
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JGB TECHS: (M5) Rallies off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.40 @ 15:42 GMT May 23
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows and for now, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US FISCAL: Total Tariff Income Jumping In May As New Rates Hit
Treasury reported a record $16.5B in customs/excise taxes on May 22, reflecting the large increase in tariff rates that went into effect in April.
- Today's report is important because it represents the largest tariff collections of the month which are typically on a due date around the 22nd, when most corporate importers make their payments.
- Thursday's one-day collection is a record, and the month has already set a new record. Tariff revenues have totaled $22.3B so far in May, and are came in at $17.4B in April (after averaging $8.1B/month in 2024).
- For the fiscal year as a whole so far, customs duties have totaled just under $93B, per the Treasury Daily Statement.
US FISCAL: Extraordinary Measures Continue To Dissipate Alongside Treasury Cash
Treasury's latest estimate of the size of "extraordinary measures" available to use "in order to prevent the United States from defaulting on its obligations as Congress deliberate[s] on increasing the debt limit" is down to $67B on May 21 (of an available $299B), vs $82B a week earlier.
- The amount hit the 2nd lowest level since the debt limit impasse started, at $46B, on May 20 (the low was $34B on Feb 24).
- With $476B in cash in the Treasury General Account on May 21, that left the total resources available to Treasury at $543B, the least since April 14 - the day before the annual April 15 tax deadline.
- Treasury Sec Bessent warned Congress earlier this month that "there is a reasonable probability that the federal government's cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess. Therefore, I respectfully urge Congress to increase or suspend the debt limit by mid-July".
