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available capacity to store surplus crude oil is limited. While capacity at Cushing has been growing, some of this storage will be used to increase supplies of heavier Canadian grades. Alternatives in the form of floating storage will progressively fall as oil demand recovers. Given that we see lacklustre prospects for gasoline demand on the back of a jobless recovery, the scope for a recovery in US light crude demand seems limited, notably when, given the addition of conversion capacity, the heavier (and cheaper) barrel is likely to be favoured. In addition, the second phase of TransCanada’s Keystone pipeline expansion will reportedly begin service this quarter, delivering more Canadian oil directly to Cushing. A further extension of the pipeline to the Gulf Coast is still some time away, so without geographic ‘optionality’, the potential for episodic supply surpluses remains intact, as does the contango and/or weakness relative to Brent. On the Brent side, if an increase in February North Sea loadings eases supply tensions, the y/y declines in North Sea crude production (Chart 3) structurally favour a stronger Brent price. And as the production base continues to shrink, the benchmark can only become more upwardly sensitive to disruptions in comparable quality supplies (Nigerian Bonny Light for Brent and Angolan Cabinda for Forties, part of the dated Brent benchmark). Brent and commodity index switching Investors’ behaviour may finally be changing, as they seek to reduce the incidence of large negative rollyields on the WTI curve by switching to the Brent contract. While the trend in open interest for WTI and Brent over 2009-2010 has not shown clear and present divergence (Chart 4), this could change with persistence of bouts of WTI weakness tied to Cushing storage developments. Contrasting the share of WTI and Brent in the GSCI, a large long-only passive commodity index (Chart 5), the re-balancing of weightings in 2011 has been in Brent’s favour, though WTI still retains the lion’s share of oil’s contribution to the index. But investors are not confined to indices, and long positions on futures can be held independently. As such, it would not be surprising to see this year more funds diverted Brent’s way to minimise negative rollyield, providing an additional factor of support for Brent relative to WTI in addition to the fundamentals discussed above. Harry Tchilinguirian 20 January 2011 Market Mover Non-Objective Research Section 68 www.GlobalMarkets.bnpparibas.com
Economic Calendar: 21 - 28 January GMT Local Previous Forecast Consensus Fri 21/01 07:45 08:45 France Industry Survey (sa) : Jan 103 102 n/a 09:00 10:00 Germany Ifo Headline : Jan 109.9 110.9 109.9 09:00 10:00 Ifo Expectations : Jan 106.9 107.9 106.5 09:00 10:00 Ifo Current Assessment : Jan 112.9 113.9 113.2 09:30 09:30 UK Retail Sales (inc Autos) m/m : Dec 0.3% -2.0% -0.2% 09:30 09:30 Retail Sales (inc Autos) y/y : Dec 1.1% -0.8% 1.1% 14:00 15:00 Belgium Business Confidence : Dec 3.1 2.0 2.6 Sun 23/01 Portugal Presidential Election Mon 24/01 00:30 11:30 Australia PPI q/q : Q4 1.3% 0.5% n/a 00:30 11:30 PPI y/y : Q4 2.2% 3.2% n/a 08:30 09:30 Netherlands Producer Confidence : Jan 2.5 4.0 n/a 09:00 10:00 Eurozone PMI Manufacturing (Flash) : Jan 57.1 57.1 60.5 09:00 10:00 PMI Services (Flash) : Jan 54.2 54.2 59.0 09:00 10:00 PMI Composite (Flash) : Jan 55.5 55.5 n/a 10:00 11:00 Industrial Orders m/m : Nov 1.4% 2.0% 2.4% Tue 25/01 00:30 11:30 Australia CPI q/q : Q4 0.7% 0.8% n/a 00:30 11:30 CPI y/y : Q4 2.8% 3.0% n/a Japan BoJ Rate Announcement 07:00 08:00 Germany GfK Consumer Confidence : Feb 5.4 5.4 5.4 07:45 08:45 France Household Consumption m/m : Dec 2.8% -0.5% 0.3% 07:45 08:45 Household Consumption y/y : Dec 1.5% -0.3% 0.3% 07:45 08:45 Housing Starts (3-mths) y/y : Dec 12.1% 9.0% n/a 07:45 08:45 Industry Survey : Q1 9 5 n/a 08:00 09:00 Spain PPI m/m : Dec 0.3% 0.6% n/a 08:00 09:00 PPI y/y : Dec 4.4% 5.0% n/a 09:30 09:30 UK GDP (Prel) q/q : Q4 0.7% 0.3% 0.5% 09:30 09:30 GDP (Prel) y/y : Q4 2.7% 2.4% 2.6% 09:30 09:30 PSNCR : Dec GBP16.8bn GBP16.3bn GBP18.0bn 09:30 09:30 PSNB : Dec GBP22.8bn GBP16.0bn GBP20.0bn 12:00 07:00 Canada CPI m/m : Dec 0.1% 0.2% 0.1% 12:00 07:00 CPI y/y : Dec 2.0% 2.6% 2.5% 12:00 07:00 BoC Core m/m : Dec 0.0% 0.0% -0.1% 12:00 07:00 BoC Core y/y : Dec 1.4% 1.8% 1.7% 14:00 09:00 US S&P/Case-Shiller Home Price Index : Nov 15:00 10:00 Consumer Confidence : Jan 52.5 54.0 54.7 15:00 10:00 FHFA HPI : Nov Wed 26/01 Australia Public Holiday 09:00 10:00 Italy Retail Sales y/y : Nov -0.6% 1.5% n/a 09:30 09:30 UK BoE MPC Minutes 13:00 14:00 Norway Norges Bank Rate Announcement 15:00 10:00 US New Home Sales : Dec 290k 300k 300k 15:30 10:30 EIA Oil Inventories 19:15 14:15 FOMC Rate Announcement 16:00 17:00 Eurozone ECB’s Stark Speaks in Kiel, Germany 17:00 18:00 France Job Seekers (ILO def. sa) : Dec 21k -5k n/a Thu 27/01 23:50 08:50 Japan Trade Balance (nsa) : Dec JPY163bn JPY572bn JPY493bn (26/01) 07:45 08:45 France Consumer Confidence : Jan -36 -38 -36 08:00 09:00 Spain Retail Sales (Adjusted) y/y : Dec -1.5% -2.2% n/a 08:15 09:15 Sweden Consumer Confidence : Jan 20.8 20.0 n/a 08:30 09:30 Unemployment Rate : Dec 7.1% 7.1% n/a 08:30 09:30 PPI m/m : Dec 0.8% 0.6% n/a 08:30 09:30 PPI y/y : Dec 2.2% 2.6% n/a Market Economics 20 January 2011 Market Mover 69 www.GlobalMarkets.bnpparibas.com
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Market Economics | Interest Rate St
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The obvious focal point is the Summ
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such shocks at the moment, such as
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US monetary conditions, because the
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Chart 9: Asia- Ifo Expected Inflati
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President Bullard was generally sup
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Canada: Betting on Investment and E
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Eurozone Inflation: Forecast Revisi
Page 17 and 18: optimism on Germany, in last week
Page 19 and 20: On the basis of the relationship be
Page 21 and 22: The nominal policy rate and nominal
Page 23 and 24: households. Furthermore, the statis
Page 25 and 26: Norway: Norges Bank Preview • We
Page 27 and 28: Japan: New Cabinet and Policy Outlo
Page 29 and 30: Japan: Capex Outlook • Core machi
Page 31 and 32: US/EUR Spreads: Further Tightening
Page 33 and 34: US: Could the Short End Have a Puls
Page 35 and 36: Trades with higher hit ratio and Sh
Page 37 and 38: ange bound, as we expect, given tha
Page 39 and 40: EUR: Liquidity is No Stress • The
Page 41 and 42: EMU Debt Monitor: Trade Ideas • K
Page 43 and 44: EMU Debt Monitor: CDS Analysis Char
Page 45 and 46: EMU Debt Monitor: Redemptions • O
Page 47 and 48: EUR: Buy 3m5y Straddle vs 3m10y Str
Page 49 and 50: Global Inflation Watch Eurozone HIC
Page 51 and 52: Table 2: BNP Paribas' Inflation For
Page 53 and 54: Inflation: With Supply Comes Opport
Page 55 and 56: Pricing Date Repo Rate Sett. Date T
Page 57 and 58: Germany 10y: MT 61.8% (3.12) break
Page 59 and 60: Travelling Asia • Inflation has e
Page 61 and 62: Capitalism requires business cycles
Page 63 and 64: EURUSD Rally Eyes 1.3750-1.3950 •
Page 65 and 66: Currency Spot Trade Recommendations
Page 67: than an unrelenting rise in prices
Page 71 and 72: Key Data Preview 120 115 110 105 10
Page 73 and 74: Key Data Preview Chart 5: French Sa
Page 75 and 76: Key Data Preview 10 5 0 -5 -10 -15
Page 77 and 78: Key Data Preview 3 2 1 0 -1 Chart 1
Page 79 and 80: Economic Calendar: 31 Jan - 25 Feb
Page 81 and 82: Next Week's T-Bills Supply Date Cou
Page 83 and 84: Economic Forecasts GDP Year 2010 20
Page 85 and 86: Market Coverage Market Economics Pa
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