Outlook: The global petroleum market continues to tighten, encouraging buying. Nearby WTI raced up to $82.18 this morning with current trade having pulled back to $81.00, which is still in multi-year high territory. ULSD is 3.5 cents higher and is leading the products higher. Natural gas futures are down near 22 cents to $5.34. Even as the world struggles with natural gas supply, the US supply situation is not as dire due to limited LNG export capacity and a weather outlook that is mild over the next couple of weeks.
- The primary question we may ask is at what price does Saudi Arabia and Russia feel that objectives have been achieved to push more production to market out of their spare capacity.
- Last week the US Department of Energy talked down the prospects of an SPR release or a ban on US crude exports. I would anticipated US pressure on OPEC+ to increase production will continue as it can.
- Saudi Aramco estimates the natural gas crisis is already causing a switch where oil demand has increased 500,000 bpd. Citigroup estimates demand for oil through switching could reach 1 million bpd.
- ULSD has been gaining against WTI in recent weeks and the nearby crack spread is positioned at $24.56 up considerably from $6.51 in Sep 2020. Strength in HO cracks have the ability to maintain as US distillate supplies are low for this time of year and switching from natural gas to diesel.
- November RBOB climbed to a new contract high above $2.41 with current trade near $2.39.
- Conway propane was last trade at 1.4875 in spot trade, up more than 2 cents on the day.
- Qatar, the world’s largest LNG exporter, says it is unhappy with the current tight supply situation and high prices in Asia and Europe. “If the customer is unhappy, he’s not going to buy,” said Energy Minister Al-Kaabi. He said Qatar is maxed out on production and suggests US natural gas will soon succumb to the pressure of vastly higher international prices.