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Something for your Espresso: Oil to spoil the duration party?

The oil price has made a “sneaky” comeback over Christmas amidst the global duration/receiver party. Time to hedge duration bets in energy space?
2023-12-27

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?

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