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05 June 2019 by jbchevrel

Black gold came under pressure today. WTI came down more than 4%. Now back at the lowest level since January. The move down accelerated after the DOE release. Total petroleum stockpiles surged by the most on record in data going back to 1990 last week, according to the EIA. That was due to a combination of higher imports, lower seasonal demand and a rise in local supply. As far as the latter, it has been multiplied by 2.4x over the past decade. We could feel the impact of that move, in both CDX and single name CDS spaces. As far as the latter, oil-related names underperformed in both IG (ECACN +5.5 DVN +3.5 APA +3 VLO +2.5 CNQCN +2 HES +2 vs CDX IG fair value -1.2) and HY (WFT aside, CHK +75 RIG +64 NBR +46 vs CDX HY fair value -0.6). As far as the former, CDX HY decompressed vs CDX IG by almost 4bp, looking at the relative value on a 1:4 basis. Most of the names cited above in the US saw their <5y CDS curves steepen, in this move led by the 5y point. In sovereign CDS space, this crude move had no impact. Fiscally oil-dependent countries such as Malaysia, Colombia are just wider by 1bp. Along with Brazil. Mexico is unchanged. Indonesia and Russia are tighter by -1bp and -2.5bp, respectively.