Outlook: The energies are sharply lower this morning as investors seem to be taking off risk in front of this week’s Fed meeting. Equities have also fallen deeply into negative territory, with Dow futures down by over 600 points earlier. Additional weakness stems from a strengthening U.S. dollar which has reached a new 4 week high this morning, along with economic concerns out of China. Production also continues to come back after the recent hurricanes in the Gulf of Mexico, and the U.S. rig count increased to its highest since April 2020 last week. Fundamentals should remain mostly supportive in the long run, but we expect risk aversion to continue this week as investors looks towards an update on stimulus tapering.
- The CBOE Volatility index, a good metric for expected market volatility over the next 30 days, was seen reaching its highest level since May today.
- Saudi Arabia held as the largest crude supplier to China for the ninth month in a row in August, exports were up 53% year over year.
- Pressure also stems from concerns that Chinese property developer Evergrande may default, triggering negative consequences for the Chinese economy, and in turn causing spillover weakness in other economies.
- The October crude oil contract is trading $0.97 lower at $71.00. The 20-day and 100-day moving averages are $69.12 and $67.79 respectively. The 14-day RSI is 54.12%.
- As of 8:40 am CST: October Brent is down $0.83 at $74.51 and the U.S. dollar index is 0.128 higher at 93.323 while the nearby e-mini S&P 500 futures contract is down 59.75 points at 4362.
- China’s shipments of Diesel and Gasoline for the month of August fell to their lowest level since 2015 as Beijing has discouraged shipments in order to meet green targets.
- Citigroup believes that high LNG prices may cause an increase in diesel demand by 2 million bpd this winter to help support power generation.
- The October ULSD contract is trading $0.0315 lower at $2.1776. The 20-day and 100-day moving averages are $2.1335 and $2.0953, respectively. The 14-day RSI is 54.50%.
- Marathon confirmed this morning that its 363,000 bpd refinery in Los Angeles had lost power due to an earthquake on Friday.
- The October RBOB contract is trading $0.0321 lower at $2.1392. The 20-day and 100-day moving averages are $2.0703 and $2.0197, respectively. The 14-day RSI is 50.67%.
- Propane values across the globe continue to rally higher with Mt. Belvieu reaching its highest level since February 2014 last Friday, and Asia swaps hitting their highest levels since at least August 2016.
- At last look, Conway propane was trading down $0.00250 at $1.33750. Mt. Belvieu was trading down $0.00750 $1.34000.
|As of 8:40 AM CST||WTI October||ULSD October||RBOB October||Nat Gas October|