AMERICAS OIL: WTI Crude Oil ended higher after trading sideways off tariff news
Feb-07 19:36
February 7 - Americas End-of-Day Oil Summary: WTI Crude Oil ended higher after trading sideways on headlines that Trump plans to impose ‘reciprocal’ tariffs on trading partners that impose levies on US imports. Crude is on track for its third consecutive week of declines.
- Trump told Republican lawmakers that he plans to announce reciprocal tariffs as early as Friday, Reuters reported. There was confusion as to which countries might be targeted but Trump later said it would be addressed next week.
- US Treasury secretary sanctioned an international network known to facilitate shipments of Iranian oil into China. The sanctions capture individuals, specific vessels and companies operating in China, UAE and India.
- Upside is limited by oversupply risks with the potential for increased production from OPEC+ while tariff risk weighs on global oil demand.
- Any impact from the latest US sanctions on Iran is likely to be lagged and not have much initial bite, according to RBC Capital Markets.
- Canada’s Trans Mountain oil pipeline, which enables export on the Pacific Coast to Asia, could fill to capacity as early as this year if tariffs are imposed, an executive said.
- Venezuela’s state oil company PDVSA has resumed regular imports of light crude as its own output of medium and light grades dwindles, creating bottlenecks for producing exportable blends, according to company documents and vessel tracking.
- Trans Mountain said it has an opportunity to expand its Puget Sound pipeline system at the Argus Crude Summit in Houston. Trump also said today: “The administration is “going to have more liquid gold coming out of the ground than anybody’s ever seen before.” “We’re going to drive the price down, and everything else is going to follow.”
- Baker Hughes reported the global oil and gas rig count rose by 36 to 1,696 in January. US rigs were down 7 to 582.
- Baker Hughes also reported the weekly rig count, which was 586. The oil rig count was up 1 to 480 and the gas rig count was up2 to 100.
- The NOAA 6–14-day outlook is slightly supportive for heating demand on net with the northern half of the country below or close to normal with milder conditions expected in the Southeast. Elevated heating demand is likely in all PADDs apart from the southern half of PADD 1 into a part of PADD 2.
- US cracks were higher and on track for weekly gains, supported by higher demand and a busy upcoming maintenance season.
- WTI Mar futures were up 0.5% at $70.95
- WTI Apr futures were up 0.5% at $70.70
- RBOB Mar futures were up 1.4% at $2.10
- ULSD Mar futures were up 1.4% at $2.43
- US gasoline crack up 0.8$/bbl at 17.38$/bbl
- US ULSD crack up 0.6$/bbl at 31.13$/bbl
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FED: FOMC Minutes Reiterate December's Shift Toward Greater Patience
Jan-08 19:22
A few key quotes from the December minutes (link). Most of these were taken verbatim from Powell's press conference, and aren't really any more hawkish than the rate path portrayed by the December Dot Plot, so shouldn't be that surprising (and consequently haven't moved markets that much):
- The main upshot is: "participants indicated that the Committee was at or near the point at which it would be appropriate to slow the pace of policy easing. They also indicated that if the data came in about as expected, with inflation continuing to move down sustainably to 2 percent and the economy remaining near maximum employment, it would be appropriate to continue to move gradually toward a more neutral stance of policy over time."
- "Some participants" noted that "the policy rate was now significantly closer to its neutral value than when the Committee commenced policy easing in September."
- And "many participants suggested that a variety of factors underlined the need for a careful approach to monetary policy decisions over coming quarters", including recent inflation readings, sustained domestic demand, lessened downside risks to the labor market/econ activity, and increased upside risks to the inflation outlook. Again, these were flagged by Powell at the press conference.
- "A substantial majority" saw that with the policy stance "still meaningfully restrictive", "the Committee was well positioned to take time to assess the evolving outlook for economic activity and inflation, including the economy's responses to the Committee's earlier policy actions."
US: Nearly 50% Of Americans Cite Immigration Their Top 2025 Priority For US Govt
Jan-08 19:17
A new survey from the Associated Press-NORC has found that immigration is the top priority for voters in 2025, with the number of voters reporting immigration as their top issue rising significantly from 2024 and 2023.
- AP notes: "Forty-seven percent of adults cite immigration as a top issue for the government to work on in 2025, up from 35% who named immigration as their top priority issue last year. More Democrats, independents, and Republicans name immigration as their top issue compared to last year... Two years ago, just 25 percent named immigration as a top issue."
- The survey data suggests that the incoming administration of President-elect Donald Trump will have a strong mandate to push through much of the hardline border security policy outlined on the campaign trail.
- However, the data may also hint at risk for Republicans if they choose to carve the popular immigration and border security agenda into a separate reconciliation bill, leaving tax reform to be addressed in a second bill later in the year.
Figure 1: Top Priorities for the US Government. 2023-2025
Source: AP/NORC
US TSYS: Post-Dec FOMC Minutes React
Jan-08 19:05
- Treasuries bounce slightly after the Dec FOMC minutes release - not a big reaction in rates though most officials saw upside risk to inflation gaining.
- Tsys had already scaled back midday support in the lead-up to the release, TYH5 currently -3 at 108-02.5, 10Y yield +.0164 at 4.7014%. Curves climbing steeper again: 2s10s +2.268 at 41.240, 5s30s +1.753 at 46.381.
