OIL: Crude Lower, Saudi Increases Prices To Asia
After rising strongly last week, oil prices were moderately lower on Monday driven by technical selling but held onto most of the gains. The relative strength index was flashing overbought after crude rose for five consecutive sessions. The USD index fell 0.6%.
- WTI is down 0.7% to $73.42/bbl following a high of $74.99, above initial resistance at $74.39, and then a low of $73.20. Key short-term resistance is at $76.41, while initial support is $71.79, January 2 low.
- Brent fell 0.4% to $76.17/bbl after rising to $77.50, above resistance at $76.89, and then falling to $75.94. If the uptrend resumes, then attention will refocus on key resistance at $79.50. Initial support is at $74.72.
- The US is planning more sanctions on tankers carrying Russian oil. The targeting of its shadow fleet has resulted in increased demand for Middle Eastern crude and subsequent pickup in prices. Saudi increased prices for Asian customers following Oman and Dubai.
- The latest CFTC data shows that hedge fund longs on WTI rose 41% over the last three weeks, while shorts fell 33% resulting in the largest net long position since August, according to Bloomberg.
- President Biden announced a ban on new offshore oil and gas projects covering around 625mn acres of coast. The area includes the Atlantic, Pacific and eastern Gulf of Mexico. President-elect Trump has said he will “unban” these areas but to do so will require an act of Congress.
- In Canada, Alberta’s government has said that it will guarantee barrels of crude to encourage new pipelines to be built to achieve its goal of doubling its oil and gas output.
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MNI UST Issuance Deep Dive: Dec 2024 (2/2)
Throughout November’s policy and market volatility, though, Treasury auctions largely impressed, with 5 of 7 nominal coupon sales trading through.
- Auction Results: November’s nominal coupon auctions were generally strong, with five out of seven auctions trading-through, of which four saw a positive reading on MNI’s Relative Strength Indicator (RSI). The remaining two auctions; 3 and 20-year auctions tailed. See page 2.
- Upcoming Supply: Issuance resumes next week with sales of $58B in 3Y Note, $39B in 10Y Note (reopen), and $22B in 30Y Bond (reopen). December is set to see $15B in nominal Treasury coupon sales, in addition to $22B in 5Y TIPS and $28B FRN for a total of $365B – slightly below the Oct and Nov totals of $369B which were joint-highest since Oct 2021.
- MNI's review includes a calendar of upcoming auctions and buyback operations.
US TSYS/SUPPLY: MNI UST Issuance Deep Dive: Dec 2024 (1/2)
MNI's latest US Treasury Issuance Deep Dive has just been published (PDF link here):
November proved a dramatic month for Treasuries. Yields were volatile before and after the Nov 5 election - after ending October at 4.28%, 10Y yields peaked at five-and-a-half-month high just above 4.50% mid-month before closing November just below 4.18%, as markets attempted to price in the implications of a Republican “sweep”.
- Also buffeting rates was speculation over the would-be successor to Treasury Secretary Yellen. President-elect Trump’s selection of hedge fund manager Scott Bessent was greeted with bull flattening in the curve, implying perhaps that he’s seen as more cautious on fiscal deficits than some of the alternatives (he has expressed support for halving the annual budget shortfall to 3% of GDP).
- The first quarterly Refunding process of Bessent’s Treasury is in early February, by which point we may start to have a better sense of the incoming administration’s approach to both fiscal policy and to more issuance-specific considerations such as duration management.
- Bessent for instance has argued that Yellen’s Treasury erred from a risk management perspective by boosting short-duration issuance, and there are suggestions he would be in favor of reversing course, telling Bloomberg in June “When rates are very low, you should extend duration…I think it’s very unfortunate what Secretary Yellen’s doing. She’s financing at the front end, and she’s making a bet on the carry trade, which is not good risk management.”
US LABOR MARKET: MNI US Employment Insight: Soft Enough To Keep Fed Cutting
Our latest Employment Insight has just been published and emailed to subscribers.
