Something for your Espresso: Oil to spoil the duration party?
Morning from Europe!
We are back from the holidays and resume our normal publication schedule.
The oil price has made a sneaky comeback over Christmas as congestion trends are extremely strong from a seasonal perspective. Congestion is up >10% since exactly a year ago and the implied demand data for transportation fuel is likely to catch up in the EIA release this week.
If there is a demand slowdown brewing, it certainly remains very well-hidden in the energy demand data. Pairing this demand rebound (from a seasonal perspective) with turbulence in the strait of Hormuz / red sea, we have a cocktail for a moderately bullish Oil price development into New Years. We will release a piece on the developments in oil space later today as we consider jumping the trend again.
So far, duration bets remain un-impacted and we are getting the best of both worlds in our AUD duration bet with Iron Ore / Oil rallying, while yields are dropping still.
Chart 1: Seasonally strong congestion -> strong energy demand
The oil price has made a “sneaky” comeback over Christmas amidst the global duration/receiver party. Time to hedge duration bets in energy space?