OIL: Venezuela Tanker Update

US President Donald Trump’s formal designation of Venezuela’s Cartel de los Soles as a foreign terrorist organisation takes effect today, escalating tensions between the US and Venezuela and granting the US government “a whole bunch of new options” to confront narco-terrorist groups, per Bloomberg.

• Reuters reports the US is “poised to launch a new phase of Venezuela-related operations in the coming days,” but Reuters was not able to establish the exact timing or scope of the new operations, nor whether a final decision to act had been taken. Reuters notes that two US officials said "covert operations would likely be the first part of the new action against [Venezuelan President Nicolas] Maduro."
• Semafor reports: “It’s unclear how the volatile Ukraine talks may connect to the escalation against Caracas, a Russian ally and major focus for US Secretary of State Marco Rubio, who is also involved in Kyiv-Moscow peace negotiations. The outcome of the twin crises could shape Rubio’s political future, analysts said.”
• A new CBS News/YouGov survey found that “Across party lines, big majorities say the administration needs to explain what the U.S. intends regarding any action, and that it has not done so clearly yet.”
• According to the survey, “…the idea of potential U.S. military action in Venezuela meets with widespread disapproval. It doesn't get overwhelming backing from Republicans either.”

Figure 1: US Military Action in Venezuela

Source: CBS News/YouGov

• Tsy futures scaling off recent highs after the $69B 2Y note auction (91282CPL9) tailed slightly: 3.489% high yield vs. 3.487% WI; 2.68x bid-to-cover vs. 2.59x prior.
• Peripheral stats: Indirect take-up rises to 58.07% from 53.65% prior, directs rise to 30.74% vs. 34.77% prior, primary dealer take-up 11.18% vs. 11.58% prior.
• The next 2Y auction is tentatively scheduled for December 22.

• US TSY 2Y NOTE AUCTION: HIGH YLD 3.489%; ALLOTMENT 27.70%
• US TSY 2Y NOTE AUCTION: DEALERS TAKE 11.18% OF COMPETITIVES
• US TSY 2Y NOTE AUCTION: DIRECTS TAKE 30.74% OF COMPETITIVES
• US TSY 2Y NOTE AUCTION: INDIRECTS TAKE 58.07% OF COMPETITIVES
• US TSY 2Y AUCTION: BID/CVR 2.68