Business

When it comes to the oil market, the narrative over the past year, ever since OPEC's first aborted meeting last April, has been just one: limit crude supply in hopes of rebelancing the oil market, reducing excess inventories, in the process sending the price of oil higher. However, echoing what we have warned for many months, overnight the world’s biggest independent oil trader said OPEC's efforts could be in vain because the oil producing cartel is seeking to control the wrong thing: it's not a matter of supply, but global demand which is simply not there.

Yesterday's 3 Year auction was mediocre at best. Today's sale of $23 billion in 10Y paper was terrible.

Today's auction, unlike last month's super-strong sale of 10Y paper, was one of the worst auctions in recent history, first printing at a 2.40% yield, tailing the When Issued 2.32% by 1.8 bps, the biggest tail since February's 1.9bps. The yield was higher than April's 2.332% but lower than the 2.68% from March.

In JPM's initial market comment this morning, reacting to the news of Comey firing, the bank said that "as far as the market is concerned, Comey’s dismissal saps Trump’s political capital and weakens relations w/Congress at the time when he is trying to move an ambitious pro-growth agenda through the Senate and House." What JPM was referring to was the potential of substantial incremental delays now facing Trump's parallel reforms, healthcare on one hand and tax reform on the other.

WTI and RBOB have rallied since last night's surprisingly large Crude draw (and gasoline build) reported by API, and DOE ata confirmed with inventory draws across the entire complex (including gasoline). WTIO and RBOB prices popped as Crude inventories dropped most since 2016 despite crude production rising above 9.3mm - highest since Aug 2015.

API

The U.S. economy will fall short of the Trump administration's goal of 3 percent growth this year and will only achieve that when its regulatory, tax, trade and energy policies are fully in place, Commerce Secretary Wilbur Ross said on Tuesday.

The GDP target "is certainly not achievable this year," Ross told Reuters in an interview. "The Congress has been slow-walking everything. We don't even have half the people in place."