OIL: OPEC+ Output Hike Delay Unlikely to Stop Oil Price Fall: Capital Econ
OPEC+’s production agreement won’t reverse a downward trend in oil prices over the next few years due to structurally weak demand, Capital Economics' Hamad Hussain said, cited by the WSJ.
- According to Capital Economics, the unwinding of voluntary cuts over 18 months, compared to 12 previously, should be supportive, as few barrels will return to the market. The impact of such a curb will be felt in 2026 too.
- However, brent is still likely to fall to $70/b by the end of 2025 and $60/b by year-end 2026, Capital Economics forecasts.
- This outlook is driven by the impact of EVs on China’s oil demand, coupled with the likelihood of non-compliance within OPEC+ as some members likely look to boost market share.
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EQUITIES: Estoxx put spread
- SX5E (15th Nov) 4700/4600ps, trades 4.1 in 4k.
- SX5E (20th Dec) 4700/4600ps, trades for 14.2 in 2k.
US TSY OPTIONS: Sample Of Heavy Overnight Volumes
Underlying futures are broadly weaker in post-election trade, heavy volume (TYZ4 > 2M already), curves bear steepen (2s10s +9.358 at 18.367). While markets still largely pricing in a 25bp cut tomorrow, projected rate cuts into early 2025 are receding: Dec'24 -42.1bp (-44.2bp), Jan'25 -54.3bp (-57.7bp), Mar'25 -69.7bp (-74.6bp).
- +18,000 TYZ4 112.5 calls, 4 after multiple TYZ4 112.5 calls sold from 14 down to 3, total volume over 80,000
- -30,000 TYZ4 113 calls, 3
- 5,000 TYZ4 107/108 put spds, 8 ref 109-22.5
- over 11,500 TYZ4 107 puts, 6
- 3,000 TYZ4 111.75/113.5 call spds ref 109-12.5
- 2,000 TYZ4 110.75/112.5 1x2 call spds ref 109-10.5
- 2,500 TYZ4 111/112.75 1x2 call spds ref 109-18
- appr 10,000 TYZ4 111/112/113.25 broken call trees, 8 ref 109-19
STIR: SONIA Futures Twist Steepen, 31bp Of Cuts Priced Through Dec
Impetus from the long end/U.S. Tsys has pulled GBP STIRs off dovish session extremes, as the inflationary impact of the tariff expectations linked to the impending Trump Presidency is felt.
- BoE-dated OIS prices 23bp of cuts for tomorrow, 31bp of cuts through year-end, 57.5bp through March and 76bp through June. Contracts are now flat to 5bp more dovish on the day through ’25.
- SONIA futures +5.0 to -4.0, strip twist steepens.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference Vs. Current Effective SONIA Rate (bp) |
Nov-24 | 4.722 | -22.8 |
Dec-24 | 4.641 | -30.9 |
Feb-25 | 4.459 | -49.1 |
Mar-25 | 4.374 | -57.6 |
May-25 | 4.231 | -71.9 |
Jun-25 | 4.190 | -76.0 |
Aug-25 | 4.123 | -82.7 |
Sep-25 | 4.110 | -84.0 |
Nov-25 | 4.083 | -86.7 |
Dec-25 | 4.081 | -86.9 |
