Outlook: Increased oil exports from OPEC and concerning manufacturing data out of China acts to depress crude and product prices this morning. Increased Covid cases in the Asia-Pacific region brings in concern about demand. Selling is picking up as the morning moves forward with WTI down nearly $2.50 and HO and RBOB down more than 5 cents.
Crude
- The NBS manufacturing PMI for China, representative of state-owned enterprises, dropped to 50.4 in July from 50.9 in June, the lowest reading since February 2020. The Caixin PMI for July, which covers export-oriented and smaller firms, fell to 50.3 in July from 51.3 in June. Weaker PMI suggests higher raw material and energy prices have put a strain on industrial companies in China.
- IHS Markit Manufacturing PMI for July rose to 63.4 from 62.1 in June and was the highest reading since May 2007. Input prices rose to 86.7 from 82.8 in June, the highest reading since the series began.
- The U.S. announced they will not implement lockdown restrictions even though Delta variant cases are growing. There were protests in France over the weekend after the government introduced a mandatory health pass for entry into public venues. There are Covid cases now in 14 of 32 Chinese provinces.
- The U.S. and Israel blamed Iran for an attack that killed two people on an Israel-linked tanker off the coast of Oman and warned of an appropriate response.
- A Reuters survey showed OPEC production in July was up 610,000 bpd from June to 26.72 million bpd.
- Baker Hughes on Friday showed the U.S. oil rig count fell by 2 to 385 over the week ending July 30.
- The CFTC showed money in the week ended July 27, money managers increased length in WTI futures and options by 6,576 lots to a net long 526,691.
- US Construction spending in June rose 0.1%, less than a 0.4% increase anticipated.
- As of 9:45 am CDT: September Brent is $1.55 lower to 73.86, the U.S. dollar index is 0.223 lower at 91.951 while the nearby e-mini S&P 500 futures contract is up 17.50 points at 4,407.00.
Diesel
- India’s July diesel demand was 10.9% lower than the same period in 2019 and 3.5% lower than June.
- In 2019, the U.S. was short 60,000 truck drivers and its anticipated to increase to 100,000 by 2023, according to the American Trucking Association. Increasingly, trucking companies are turning to try to hire foreign drivers.
- The CFTC showed money in the week ended July 27, money managers increased length in ULSD futures and options by 2,875 lots to a net long 26,807.
Gasoline
- RBOB is down about 5 cents this morning but RBOB has maintained as the strongest leg in the complex as US demand remains buoyant and as gasoline inventories seasonally decline.
- Russia’s energy minister said it filed a proposal to start a ban on gasoline exports in an effort to reduce domestic prices.
- Gasoline demand in Argentina is 74% of pre-pandemic levels. Gasoline demand in India was higher in July than 2019 levels as lockdown restrictions were lifted.
- The CFTC showed money in the week ended July 27, money managers increased length in RBOB futures and options by 7,479 lots to a net long 36,976.
Propane
- After dipping initially, propane traded back near even on the day with Conway at 1.12250. Current US propane inventories stand at 64.5 million barrels and building season occurs to early October from a seasonal perspective. The 2016-2020 average at its seasonal peak in early October is 90.7 million barrels.
Conway propane forward curve remains highly backwardated for the next few years.
