Outlook: There is follow through selling today after a strong move lower yesterday in WTI, ULSD, RBOB and propane. Profit taking after a move to $85.00 earlier this week has aided in weakness. The fundamental outlook suggests global inventories continue will continue to draw through year-end, which should avoid a deep setback and in fact this may be considered a buying opportunity. Even though Iran is moving back to the negotiating table, relief in sanctions to allow for more barrels to market is likely months off.
Crude
- Yesterday the EIA reported a 4.3 million barrel US crude oil build, which was higher than consensus estimates for a build of near 2 million barrels. This encouraged profit taking in yesterday’s trade. However, Cushing, OK crude inventories fell 3.9 million barrels while gasoline stocks fell 2.0 million barrels and diesel stocks fell 430,000 barrels.
- At 27.9 million barrels, Cushing, OK crude stocks are at their lowest level since October 2018.
- Yesterday Iran said they would sit back down at the nuclear negotiation table with world powers including the EU and the U.S., which could eventually lead to a relaxation in sanctions to allow crude oil to market. This development and continued concern about the demand outlook due to Covid could be talking points needed by OPEC+ to keep their current production plan in place rather than adding more. In fact, not many are talking about OPEC+ keeping production steady in December versus adding 400,000 bpd as scheduled, however it is a possibility, particularly if crude prices drop into next Thursday.
- OPEC’s Joint Technical Committee was presented with figures showing oil inventories declining 1.1 million bpd in the fourth quarter, greater than the forecast of a 670,000 bpd drawdown reviewed last month, people familiar with the matter said.
- “We don’t see the raw material or the inflation environment slowing down in any way,” 3M’s CFO said earlier this week.
- Genscape showed Cushing, OK stocks fell 1.8 million barrels from Friday October 22 to Tuesday October 26.
- As of 10:28 am CDT: Brent crude oil down $0.78 to $83.80, US dollar index down 0.491 to 93.311 while the nearby e-mini S&P 500 futures contract is up 36.0 at 4,580.50.
Diesel
- Yesterday the EIA reported US distillate stocks fell by 430,000.
- China is grappling with energy shortages including diesel. Xinhua News said Sinopec plans to max out diesel production at its refineries starting in November to increase domestic supply.
Gasoline
- At 216 million barrels, total US gasoline inventories are 6 million barrels below the 5-year average. Days of gasoline supply stand at 23.0, below 24.3 on the 5-year average.
Propane
- After a weaker move yesterday, propane maintains a heavy tone this morning with losses near two cents. Last week US propane inventories rose 2.05 million barrels, a greater build than anticipated. At 75.7 million barrels, US propane stocks are 23% below last year and 15% below the 5-year average, with the greatest regional deficit in the Gulf Coast.
Natural Gas
- US natural gas inventories rose 86 bcf last week, near estimates. Volatility in natural gas futures persists, which current trade down 36 cents in the nearby to 5.838.
- At 3.548 tcf, storage is down from 3.951 tcf last year and 3.674 tcf on the 5-year average. However, the deficit has been narrowing.
Midwest distillate inventories fell near 1 million barrels last week but in recent weeks diesel inventories have been relatively flat, contributing to weaker basis in Group 3 and Chicago.
