Fuel crisis
October 11, 2021
–CLX1 is up 2.00/bbl this morning at 81.35, a new high. A skim of headlines is all about energy prices and crisis. Coal prices at all-time high in China as “floods swamp mine hub”. FT leads with a story about gas shortages in Europe. Lebanon was plunged into darkness as electrical grid operators ran out of fuel. Reuters has a piece about Japanese inflation 10-year breakeven having moved up to 36 bps last week from about 7 bps in July. With the start of earnings season, the impact of higher costs is a hot topic. Last October, one year ago, CLZ1 was just under $40/bbl. It’s now more than double that price. If it doesn’t double again by next year we can safely say that the rate of change has slowed, therefore, transitory.
–EDM2 was sold in size over 100k on Friday at 9978 to 77. Open interest rose by a like amount or 109k. This morning the contract prints 9975.5 as a modicum of uncertainty has crept into the front end. All yields are a bit higher this morning in front of auctions tomorrow and Wednesday (3’s, 10’s, 30’s). CPI is out on Wednesday.
–On Friday near euro$ one-year calendar spreads posted new recent highs. For example, EDZ1/EDZ2 settled 38.0, up 1.5 on the day and EDU2/EDU3 (peak spread) settled 74, up 2 on the day. Both rose 8.5 on the week. The ten year yield closed just above 1.60%, up 3.4 on the day.
–Stocks are also lower this morning, but ESZ is still 100 points above the important lows made in the beginning of the month (4260 to 4273). In 1492, Columbus sailed the ocean blue… On what used to be a holiday, conditions might be thinner than usual.
