EU ENERGY SECTOR: Repsol Q4 Trading Update

After Finance Minister and Deputy PM Chrystia Freeland's resignation on 16 Dec political betting markets have shifted against PM Justin Trudeau, showing increased implied probabilities that he could be forced from office or that the next election is brought forward. While there was speculation about Freeland's possible departure, her scathing resignation letter was a notable blow to the PM. 

• Data from Polymarket shows a 21% implied probability that Trudeau will announce his resignation by Friday 20 December. There is a 70% implied probability that he leaves office/announces his resignation by April. Bettors assign a 72% implied probability that a general election is called earlier than 20 October 2025.
• Data from Kalshi shows bettors assigning an 18% implied probability that a successful vote of no confidence take place in 2024, up from 1.4% before Freeland's resignation.
• After Freeland's resignation Jagmeet Singh, leader of the leftist New Democratic Party (NDP), urged Trudeau to resign. Asked on whether he would back a no-confidence motion he said ‘All tools, all options are on the table.’ Support from the NDP is the only thing that kept Trudeau's minority Liberal gov't in power in the most recent confidence vote earlier in December.
• Given the lack of parliamentary time left in the year, it may prove more likely that Trudeau is forced out by his own Liberal caucus (Politico reports Freeland "received a standing ovation and multiple rounds of applause," at an emergency meeting of Liberal MPs after her resignation) than by an opposition confidence motion. 

OAT basis trades, suggest cash seller:

• OATH5 1.25k at 124.68 and 1.12k at 124.71.

OI data points to a mix of net short setting and long cover during Monday’s downtick in SOFR futures.

• SFRZ4 saw the largest positioning swing once again, with nearly 80K fresh net shorts set.
• Friday’s reduction in net OI in the contract was seemingly driven by positioning unwinds surrounding the expiration of the Dec ’24 (Z4) options contracts.
• It’s harder to pinpoint a clear driver for Monday’s positioning move.
• Other notable positioning swings came via net long cover in SFRZ5 and net short setting in SFRZ7.