Outlook: The energy complex is mixed with WTI erring lower and products gaining as cracks are bought amid tight product inventories. Its anticipated crude stocks rose and product stocks fell last week and we will get further clarity this afternoon and tomorrow morning upon the release of weekly inventory stats. Today’s monthly IEA report was viewed as somewhat mixed to supportive, while US Retail Sales were robust in October even amid inflationary concern and reduced consumer sentiment.
Crude
- The IEA in its monthly report said market tightness is starting to ease amid production increases in the U.S. and elsewhere. They pointed to demand concern related to an increase in European Covid cases and price-driven demand destruction. On the supportive side they did point to OPEC+ production gains that have failed to achieve their increased production objectives, which has helped push OECD inventories to the lowest level in 5-1/2 years.
- OPEC’s Secretary General Barkindo said international oil markets may flip from deficit to surplus as soon as next month, justifying a gradual production increase from the group.
- India’s oil minister said strategic reserves are intended for force majeure situations and not for supply tightness situations like we are seeing today.
- October U.S. Retail Sales rose 1.7% m/m, above 1.4% anticipated. Industrial Production in October rose 1.6% m/m, above a 0.7% increase anticipated. Capacity Utilization was 76.4% in October, above 75.9% anticipated. The NAHB Housing Market Index was 83 in November, above 80 anticipated.
- API weekly predictions on weekly US crude, gasoline and diesel inventory shifts are due at 3:30 PM CST today followed by the EIA weekly stats tomorrow morning at 9:30 am CST. A Reuters poll suggests we may see a 1.55 million barrel crude build, a 730,000 barrel gasoline draw and a 1.6 million barrel distillate draw.
- The EIA anticipates US shale producers will add 85,000 bpd in crude production in December.
- As of 10:28 am CST: Brent crude oil up $0.20 at $82.26, US dollar index up 0.323 to 95.730 while the nearby e-mini S&P 500 futures contract is up 23.00 points to 4,702.00.
Diesel
- The IEA anticipates global refinery throughput will increase by 3 million bpd from October through December as seasonal refinery maintenance is completed and amid higher crack spreads and tight product markets.
Gasoline
- RBOB has found solid support in recent days compared to WTI and crack spreads have been moving higher amid concern about prompt supplies in the Northeast and lack of European cargoes headed to the region.
- The Dec RBOB is trading 6 cents above the January contract, an elevated backwardated structure for this time of year.
- “The removal or modification of the RVO mandate would be the single most immediate and effective way to lower fuel prices at the pump,” EVP at Turner, Mason & CO John Auers said.
Propane
- Conway propane edged lower with trade in the $1.2150-$1.2250 zone while Mont Belvieu TET traded in the $1.20625 to $1.2175 range.
Natural Gas
- Germany has stopped the Nord Stream 2 approval process, pushing Dutch TTF natural gas prices up 10%.
- Natural gas exports to Mexico were relatively unchanged at 5.4 bcf/d while LNG exports rose 0.4 bcf/d to 10.7 bcf/d.
- A shift in the outlook to cooler weather in the US aids in today’s gains of near 27 cents in the nearby futures.
- Thursday’s natural gas storage report is anticipated to show a 25 bcf injection.
Continuous Daily WT: The 50-day moving average is clear support at $78.25 while the mid-$80’s represents some low points in the 2010-2012 years and acts as resistance.
