Outlook: Continued draws out of the Cushing, OK hub due to backwardated market structure has created a feedback loop. been feeding on itself – the more the structure moves to backwardation the more Cushing, OK stocks fall. Low US and global inventory of crude and products amid the power crunch in Asia and Europe add support. Trade has backed off earlier highs despite the fundamental backdrop, but earlier gains to fresh multi-year highs keeps the upward tend intact.
- Maintenance and underinvestment in Angola and Nigeria have impeded their efforts to raise production as OPEC+ adds barrels to market each month. The impact has been higher rates to compliance upon cuts where they were 115% in September. OPEC+ meets November 4 to determine production rates for December.
- Genscape fly-over data showed Cushing, OK inventories fell 2.64 million barrels from Friday 10-8 to Friday 10-15.
- As of 10:17 am CDT: Brent crude oil down 3 cents to $84.83, e-mini S&P 500 up 8.25 to 4,471.00 with the U.S. dollar index up 113 points to 94.050.
- ULSD has moved to losses of more than a penny at 2.5600 with the earlier high of 2.6080.
- Demand for diesel used for power generators and coal extraction in China and other parts of Asia, transportation pressure in the U.S., a colder than usual winter expected in the Northern Hemisphere and current low stockpiles all act to provide support to ULSD.
- The 5-3-2 crack spread trades near $23.23, up dramatically from near $9.00 a year ago.
- Earlier gains have flipped to losses where RBOB is down more than a penny at 2.4750. The earlier high was 2.5135.
- Energy Aspects suggests US gasoline stocks could be negatively impacted with European refiners incented to ship to West African and maintenance at Canada’s Irving St. John refinery limiting exports into the US Northeast.
- High propane prices are impacting margins at petrochemical facilities that make plastics in Asia and negative margins are anticipated to reduce overall run rates.
- Volatility in natural gas markets persist with current trade in nearby Nymex futures down 19 cents to $5.22.