Tony Headrick

Sep 15, 2021

Outlook: Millions of barrels have been taken off market due to the impact of Hurricane Ida on Gulf oil production. The trend of reducing petroleum inventories continues, providing solid price support. In front of today’s EIA report, an industry group yesterday afternoon reported across-the-board draws, including in Cushing, helping to give energies a strong push higher this morning. Meanwhile, the strong rally in natural gas continues with the nearby contract pushing above $5.50/mmbtu. Propane is up 4 cents to start.

Crude

  • The API yesterday afternoon predicted US crude stockpiles fell 5.44 million barrels last week while Cushing, OK inventories fell 1.3 million barrels.
  • A Reuters poll suggests today the EIA could show a 3.5 million barrel US crude oil drawdown. A Bloomberg poll suggests a 2.7 million barrel draw.
  • Brent is above $75, breaking above the months’ long triangle pattern.  
  • Retail sales in China rose 2.5% in August y/y, a big disappointment compared to expectations calling for a 7.0% increase.
  • About 720,000 bpd oil production remained offline in the Gulf of Mexico on Tuesday.
  • In its monthly report, the IEA kept its view of 2022 oil demand relatively unchanged, but pointed to concern about oil production due to lack of upstream investment due to the Covid crash.
  • As of 9:06 am CDT: November Brent is $2.26 higher to $75.86, the U.S. dollar index is 0.138 lower to 92.485 while the nearby e-mini S&P 500 futures contract is up 9.25 at 4453.75.

Diesel

  • ULSD has pushed into a new high for the year this morning with current trade above $2.2200.
  • Yesterday afternoon the API estimated US distillate stocks fell 2.9 million barrels last week.
  • A Reuters poll suggests today the EIA could show a 1.6 million barrel weekly distillate drawdown. A Bloomberg poll suggests a 2.6 million barrel draw.

Gasoline

  • Yesterday afternoon the API estimated US gasoline inventories fell 2.76 million barrels last week.
  • A Reuters poll suggests today the EIA could show a 2.0 million barrel US gasoline drawdown. A Bloomberg poll suggests a 3.3 million barrel draw.
  • Energy companies had to take a pause in restoring pipeline service, power and refinery operations after Tropical Storm Nicholas and are now back to work trying to recover from Hurricane Ida from two weeks ago.

Propane

  • An OPIS poll suggests today the EIA may report a 902,000 barrel build in US propane inventories with responses ranging from a 500,000 barrel build to a 2.5 million barrel build.

Natural Gas

  • On the back of a spike in European gas prices, Henry Hub natural gas is up more than 30 cents to 5.565 in the nearby.
  • In the Gulf of Mexico, more production has come back but 1.136 bcf/d remains offline.
  • US natural gas dynamics suggest a continued expansion in the deficit in coming weeks.

This one chart sums up the overall bullish view. Its not readily discussed in the marketplace but I think should be. This is net petroleum inventories in the US as of last week. All indications suggest we will see another net draw reported at 9:30 am CDT this morning.