OIL: Mexico’s Crude Output Decline Could Accelerate: Platts
Jan-03 13:00
Pemex's crude production is expected to decline further in 2025, which may force Mexico to import crude for its refining and affect its credit rating, Platts said.
- Only the Trion and Zama projects could boost production, but not enough to offset declines.
- Zama's development is delayed until late 2024, with peak production expected by 2029-2030. Trion is expected to start producing in 2028.
- Pemex relies on a few projects, with 50% of its output from seven declining fields.
- Alma América Porres Luna, a former CNH commissioner predicts a loss of 100k b/d annually from 2025.
- Current budget render it unlikely that Pemex can revive production. Pemex's 2025 budget is 7.5% lower than 2024, although the government still expects Pemex to maintain its 1.8m b/d output target.
- Furthermore, private companies obtaining exploration contracts have eschewed investment, including Shell, Chevron, and BP.
- The new 320k b/d Olmeca refinery is not expected to be fully operational until late 2026, Platts estimates.
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US TSY FUTURES: Extending Lows, Curves Bear Steepening
Dec-04 12:56
- Treasury futures are extending lows in the lead up to this morning's ADP private employment data. No obvious headline or flow driver.
- Mar'25 10Y trading 110-20.5 (-10.5), still well above initial technical support at 110-01/109-20 (Low Nov 25 / Low Nov 20/21). Curves continue to climb off last week's inversion, 2s10s +2.217 at 6.516, 5s30s +.440 at 29.167.
CANADA: Banks’ Credit Loss Provisions Don’t Reveal Any Major Surprises
Dec-04 12:42
- The start to the bank earnings season has seen adjusted EPS estimates all come in close to expectations for Scotia yesterday before RBC and National today - see table below.
- From a macro angle, there weren’t any major surprises in credit loss provisions. Scotia was encouragingly a little lower than expected whilst RBC and National provisions were as expected but that still entailed an increase on the quarter in Q4.
- PCL ratios meanwhile remain saw some stabilization in the prior uptrend for Scotia (54bp in Q4 vs 57bp in Q3, 46bp in 4Q23 and 19bp 4Q22) whilst RBC’s was within recent range (35bp in Q4 vs 27bp in Q3, 34bp in 4Q23 and 19bp in 4Q22). They're broadly in line with pre-pandemic rates - see charts.
- BMO, CIBC and TD round out the “big six” domestic banks tomorrow.
GILTS: Early Low In Futures Intact, Gilt/Bunds Can't Break 220bp
Dec-04 12:41
Pressure in wider core global FI markets and the bid in equities weighs on gilts, although bears haven’t managed to force a break of opening session lows.
- Contract last -30 at 95.70 vs. lows of 95.67.
- Fresh extension lower would target the November 28 low (95.17).
- Yields ~3.5bp higher across the curve.
- 220bp continues to cap widening in the gilt/Bund spread. A break above would expose the ’22 mini-Budget high (227.5bp).
- Most SONIA futures pressured by moves in wider core global FI markets, last little changed to -4.0.
- Initial dovish reaction on misleading headlines covering comments from BoE Governor Bailey (which we contextualised earlier) fully unwound.
- Meanwhile, BoE-dated OIS shows 82bp of cuts vs. closer to 85bp late yesterday and ~88bp at today’s dovish session extreme.
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