REFINING: Valero Expects Strong Refining Margins to Continue Q4
Oct-26 09:33
US refiner Valero expects to run its refineries at up to 95% capacity in Q4 because of tight supply for domestic motor fuels as well as overseas demand.
- Valero's refineries ran at 95%, or 3 million bpd, of combined total capacity in the third quarter. It has 14 refineries with a capacity of 3.2mn bpd.
- "Refining margins remain supported by strong product demand, low product inventories and continued energy cost advantages for U.S. refineries compared to global competitors," Valero Chief Executive Joe Gorder said.
- US refiners have also taken advantage of a strong export market to Europe and South America. European demand is likely to keep growing as the February 5 ban on Russian oil products draws near. Europe is still heavily reliant upon those flows.
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BONDS: UK markets driving core FI
Sep-26 09:29
- It's been all about the UK this morning with markets SONIA futures seeing another up to to 80 tick drop this morning on the back of further follow through from last week's BOE meeting, the UK government fiscal event and further comments from the Chancellor over the weekend that more tax cuts are to come.
- The gilt curve has been bear flattening this morning and the UK 2s10s curve (after almost a 20bp move) is now the most inverted it has been in over 15 years at -34.5bp. 10s30s has flattened, too, but has yet to break through the lows seen in June of this year.
- USTs and EGBs have been pulled low by gilts (although those curves have actually bear steepened slightly) but the moves are tiny in comparison to those seen in gilts today.
- We have also seen BTP-Bund spreads widen around 6bp following the weekend election results.
- TY1 futures are down -0-19+ today at 112-00+ with 10y UST yields up 7.5bp at 3.764% and 2y yields up 6.9bp at 4.275%.
- Bund futures are down -0.72 today at 138.76 with 10y Bund yields up 6.3bp at 2.083% and Schatz yields up 4.8bp at 1.948%.
- Gilt futures are down -2.93 today at 961.16 with 10y yields up 32.4bp at 4.148% and 2y yields up 51.8bp at 4.445%.
ITALY: Center Right Fratelli d'Italia Set To Form Coalition Government
Sep-26 09:27
Yesterday's Italian general election delivered a decisive victory for the center-right coalition of Fratelli d'Italia, Forza Italia and Lega.
- FdI slightly outperformed expectation at the expense of other right right-wing parties Forza Italia and Lega, giving FdI leader Giorgia Meloni a strong mandate to build a government.
- The first round shows the coalition led by FdI securing the second largest parliamentary majority since 1945. Likely 235/400 MPs in the lower chamber and 115/200 senators in the upper chamber.
- Strong performance of the coalition to deliver a rare period of parliamentary stability reflected in a robust response on Italian markets.
- It should be noted that although the center-right has gained a majority in both houses of parliament they fell short of the two-thirds majority required to alter the constitution without a referendum.
- Meloni is expected to announce her cabinet by the end of October, with a government expected by early November, at which point market focus will turn to the budget for 2023.
- The relatively weak performance of PD is likely to trigger a period of rebuilding amongst opposition.
- Results: Fratelli d'Italia (FdI): 26.3%, Democratic Party (PD): 19.3%, Lega: 8.9%, 5Star: 15%, Forza Italia (FI): 8.0%, Azione (Az) Italia Viva: 7.8%, Sinistra: 3.7%, Italexit: 1.9%
USDCAD TECHS: Fresh Trend High
Sep-26 09:13
- RES 4: 1.3716 High Jun 26 2020
- RES 3: 1.3702 2.382 proj of the Aug 25 - Sep 7 - 13 price swing
- RES 2: 1.3651 61.8% retracement of the 2020 - 2021 bear leg
- RES 1: 1.3638 Intraday high
- PRICE: 1.3593 @ 10:09 BST Sep 26
- SUP 1: 1.3468/3358 Low Sep 23 / 21
- SUP 2: 1.3232 20-day EMA
- SUP 3: 1.3079 50-day EMA
- SUP 4: 1.2954 Low Sep 13
USDCAD maintains a clear bullish tone and the pair has traded higher again today. The extension reinforces bullish conditions and maintains the positive price sequence of higher highs and higher lows. Moving average studies are in a bull mode position, highlighting current market sentiment. Sights are set on 1.3651 next, a Fibonacci retracement. On the downside, initial firm support is at 1.3232, the 20-day EMA.
