Outlook: US crude stocks typically increase this time of year and combined with additional OPEC+ barrels into the coming months its anticipated that the setback in global inventories that has been ongoing for months may begin to stabilize into 2022. It appears the energy complex has taken this into account in recent sessions, in addition to the prospect of an SPR release. Energy Secretary Granholm said that President Biden may make an announcement this week to address high oil and gasoline prices. Consider an SPR release may bolster OPEC+'s resolve and could further diminish investment in E&P, which could ultimately be viewed as bullish. In that regard, consider long hedge's in the deferred contracts.
Crude
- OPEC+ decided to keep their production schedule in place and intend to add 400,000 bpd of oil production in January.
- Saudi Arabia increased its official selling price of oil to all buyers. Saudi Aramco increased its OSP for Arab Light to Asia from $1.70 to $2.70, well above what was anticipated. She suggested that tomorrow’s monthly EIA report may factor into any determination, which if pursued will likely include an SPR release.
- On a five year average, US crude oil stocks rise about 3.4 million barrels for this time of year, a figure we could see reported on Wednesday when the EIA releases its Weekly Petroleum Status Report.
- Crude timespreads appear to have found a top a week ago. As an example the Dec/Jun WTI spread currently trades at $6.02, down from a high of $8.61 last Monday. Weakening timespreads tends to limit speculative capital flow into crude oil.
- US equity indices have moved into record territory and the dollar is lower, both of which are supportive to energy.
- Drilling rigs targeting oil rose by six last week to 450, a 19-month high.
- The UAE says oil might be double the price today without OPEC+, which is being viewed as a signal OPEC+ may continue to resist U.S. pressure.
- As of 10:00 am CST: Brent crude oil up $0.45 at $83.19, US dollar index down 0.293 to 94.027 while the nearby e-mini S&P 500 futures contract is up 6.25 at 4,696.50.
Diesel
- After Thursday’s sharp drop to a low of 2.3980, nearby ULSD futures have moved back to 2.4660.
- China has pushed to increase coal production for electricity purposes, which could act to reduce demand for alternates to natural gas such as diesel fuel used for generators.
Gasoline
- The December RBOB crack spread is at 15.74 and has been weakening in recent weeks, which can be viewed as a bearish indicator to the energy complex.
- At last look AAA pegged the US regular grade gasoline price at $3.422. The record average price was $4.114 in July 2008.
Propane
- Propane exports are viewed on the upswing amid cooler temperatures in China. Into next year Energy Aspects anticipates Asian buyers will turn more towards the Middle East for LPG supplies amid delays and congestion in the Panama Canal.
Natural Gas
- The natural gas storage deficit to the five-year average has been narrowed to about 100 bcf but prospect for further narrowing appear limited considering the weather and production outlook.
- An overall net short speculative positioning could allow the market to remain sensitive to short term temperature shifts to the colder side.
- Natural gas demand rose 5.7% w/w last week, or 5.2 bcf/day as residential demand rose, IHS Markit showed.
- Natural gas drilling rigs in the US were unchanged last week at 100.
Oil held in floating storage worldwide rose to 98.409 million barrels, Vortexa shows.
