09 December 2020 by jbchevrel
Ovintiv (OVV) along with other energy-related CDS, under performed today. The 5y contract closed wider +9bp. There was a non-skew OWIC on 4y CDS, mainly energy names earlier today. These were 3 millions per name except Ovintiv 1.5 million. The move was most likely helped by crude price action. We saw a quick dip from $46+ to $45 area. The EIA reported today a massive crude oil inventory build of 15.2 million barrels for the week to December 4, after a modest draw of 700,000 barrels estimated for the previous week. The expectation was for a (small) draw. This week's rise in crude inventories came close to the largest crude build ever, which was recorded earlier this year for the week ending April 10, when the EIA reported a 19.3 million barrel inventory build. A day earlier, the American Petroleum Institute had reported a crude oil stock build of just of 1.1 million barrels along with much larger builds in gasoline and distillate fuels. So this API number didn’t let the market participants imagine that we could see such a DOE number today. In fuels, the EIA reported an inventory build in gasoline and another build in distillate stocks for the week to December 4. This is not without reminding us what we saw in spring, as a result of lockdowns and lower mobility across the board. Today’s number is a reminder for the market that the vaccine’s impact is yet to be seen. Adding to the macro softness, was the Congress back-and-forth on fresh fiscal stimulus spending in the US. The size and allocation of this is the critical point. The Trump administration proposed a $916 billion package on Tuesday after Democrats rejected an effort by Senate Majority Leader Mitch McConnell to narrow the scope of the bill.