Outlook: Crude, ULSD and RBOB are above earlier lows but are lower nonetheless amid continued calls on the Biden Administration to release SPR barrels or impose a ban on U.S. crude exports. A stronger U.S. dollar has acted as a headwind to oil in recent weeks and concern about Covid-related lockdown measures in parts of the world may impact demand. U.S. retail sales data set for tomorrow and IEA's monthly report should help guide the markets view on demand into Christmas. The overall pattern this week may favor neutral to lower trade. Downside should remain limited, however, as global stockpiles continue to decline.
Crude
- Lockdown measures in parts of Europe brings concern about energy demand. Unvaccinated people in Austria are now subject to strict lockdown measures. The Netherlands has imposed restrictions and German officials are meeting next week to discuss tightening measures.
- Genscape flyover data showed crude oil stocks held at the Cushing, OK hub fell 719,000 barrels from Friday Nov 5 to Friday Nov 12.
- OPEC+ signaled they would not cave to pressure to increase production as their analysis suggests the current 2.7 million bpd supply deficit will turn to a surplus of 2.5 million bpd in the first quarter 2022.
- Senate Majority Leader Chuck Schumer said the U.S. should release additional SPR barrels in an effort to reduce gasoline prices.
- US oil production at 11.5 million bpd and may move steadily higher as rig counts continue to edge up with the latest Baker Hughes reading showing 454 active oil rigs in the U.S. An ban on U.S. crude exports would shift the view of U.S. production negatively.
- Property sales and real estate investment fell in China in October. Concern about economic conditions in China have helped weigh on the energy complex.
- Tomorrow’s U.S. retail sales data will be watched across broader markets.
- The IEA releases its monthly report tomorrow and demand forecasts will be monitored closely.
- The Dec/Dec WTI spread trades at $9.50, down from a peak of $12.83 at the beginning of November.
- With current trade near $80.00, the bears have a target of $78.00, which is the 50-day moving average. A move above last week’s high of $85.00 is needed to reinvigorate the bulls.
- As of 11:24 am CST: Brent crude oil down $0.96 at $81.21, US dollar index up 0.138 to 95.266 while the nearby e-mini S&P 500 futures contract is down 8.25 points to 4,670.00.
Diesel
- Nearby ULSD fell below its 50-day moving average and a fresh low for its recent move keeps downside available.
- Global flights are down 28% from 2019 levels even as there were strong increases from 2020.
Gasoline
- Although higher today, crack spreads have been guided lower in recent weeks, a signal that demand is leveling or moving lower.
Propane
- Propane demand in Canada and the U.S. have underwhelmed and propane production is elevated amid high natural gas production rates. Consequently, propane as a percentage value to WTI has been moving lower to 67% currently from a peak of 82% at the beginning of October. The average for this time of year is near 52%.
Natural Gas
- Natural gas has found support from September lows in recent sessions near the $4.74 price point. Amid warmer weather at the beginning of last week, Thursday’s natural gas storage report could show an injection that would further reduce the deficit to the five-year.
- Natural gas production has reached record levels the last few weeks near 94 bcf/day.
- Weather runs over the weekend initially came in bearish but subsequent runs added back demand from the 6-15 day timeframe.
- European gas prices remain elevated with TTF up nearly 7%.
Conway propane as a percentage of crude oil:
