Morning Highlights
Morning Highlights

10-20-21 Weaker in front of EIA stats as China focuses on coal...

Tony Headrick

Oct 20, 2021

Outlook: Energies are broadly lower today as China may look to intervene in its coal market in order to regulate prices. Recent efforts to control high commodity prices have had little success, however thermal coal prices in China fell 8% overnight. Attention across the energy complex will quickly shift to the weekly report from the EIA at 9:30 am CDT this morning when we will get a fresh look at supply and demand situation in the U.S.


  • Many countries are becoming more alarmed about high energy prices, particularly importing countries. South Korea is exploring reducing energy importing tariffs, India looks to get companies together to negotiate import prices while Japan has joined the United States to plead to OPEC+ to increase production faster. In response, Saudi Energy Minister bin-Salman essentially said the problem comes from gas and coal market issues which are not being properly addressed.
  • China, which reduced coal production over the summer, is now aggressively ramping up production in an effort to quell the energy crisis.
  • Yesterday afternoon an industry group predicted US crude inventories rose 3.3 million barrels last week. Earlier this week, Genscape showed Cushing, OK stocks fell 2.6 million barrels last week.
  • As of 8:58 am CDT: Brent crude oil down 87 cents at $84.21, US dollar index down 0.016 at 93.718, while the nearby e-mini S&P 500 futures contract is up 9.50 at 4,520.75.


  • ULSD is down 1.7 cents in the nearby contract this morning, finding relative support against a weaker WTI price move after API stats suggested US distillate stocks fell by 3.0 million barrels last week.
  • A Reuters poll suggests today the EIA may show US distillate stocks fell 700,000 barrels last week.


  • RBOB is off near 1.5 cents prior to the EIA’s release of the Weekly Petroleum Status Report. Yesterday afternoon an industry group predicted US gasoline stocks fell by 3.5 million barrels last week.
  • A Reuters poll suggests today the EIA may show a 1.3 million barrel decline in US gasoline stocks occurred last week.
  • With retail prices well above $3.00 we should consider at what point do consumer driving habits start to shift. When looking back to 2011-2014 time period when prices were near these levels gasoline demand pulled back by about 500,000 bpd  those years when average pump prices were between $3.34 and $3.96.


  • Propane is off 2 cents this morning in sympathy with a weaker move in crude oil.
  • An OPIS poll suggests the EIA today may show a 182,000 barrel build in US propane stocks.
  • IHS Markit wrote a piece suggesting the US propane market is heading for “Armageddon” this winter which has picked up some coverage. You’ll find more detail by Googling it.

Natural Gas

  • A few points of consideration from a webinar I attended yesterday. US natural gas although not too far off average levels this year faces headwinds in two primary ways; US natural gas production has been flat (not growing), while there is extreme tightness in the US coal market and reduction in overall coal generation capacity over recent years. A 10-15% colder winter would likely force US natural gas to parity to international markets which would position prices above $15 in the Henry Hub at current prices.

We’ll see an update on US propane stocks shortly this morning but here is the last update: