Outlook: Energies are mixed to even this morning as losses overnight have been mostly erased with the exception being natural gas which has lost nearly 50 cents on a cooler forecast. Chinese imports ticking higher are the big story this morning. Continuation from a stellar job report on Friday could quench some of the recession fears that have pulled the complex much lower. Much of the backwardation has come out of crude oil as well as ULSD and RBOB. The short supply in the market would suggest that this flattening of the curve is premature with significant risk still from Russia and Ukraine as well as China which could easily bring massive demand back into the market.
Crude
- Chinese imports jumped off of 4-year lows as demand looks to return to the largest consumer in the world.
- Russia has started to hold investors hostage by blocking the sales of stocks of various companies.
- Normal trade routes have returned in the South China Sea even as the Chinese Military executes wartime drills.
- WTI fell nearly $10 last week on demand destruction and recession fears.
- Rig counts were down 7 last week.
- Nigerian exports were disrupted yet again.
- Spain’s imports have jumped 27.4% year over year.
- As of 8:59 am CST: Brent crude oil is up $0.45 to $95.37, the US dollar index down $0.422 to 106.197 while the nearby e-mini S&P 500 futures contract is up 40 at 4186.75.
Diesel
- ULSD Futures fell 34 cents last week.
- Midwest basis continues to hold as Magellan and PADD 2 inventories failed to make impactful builds in inventory.
Gasoline
- Demand continues to be lower than seasonal averages and the market has been weaker as a result.
- Non-farm payroll could be a bullish note as people continue to work and be in demand.
Propane
- 1.0600 Conway and Belvieu at 1.0600
- The market is trending lower following the rest of the complex.
Natural Gas
- European stocks have started to build again but at a pace that will not sustain the continent through winter.
- France waived environmental regulations on 5 Nuclear Power Plants allowing above regulation temperature cooling water to be released into rivers.
- CDD’s fell by 11 overnight as a cooler forecast comes into view.
Producer Strategy: As we have discussed before oil companies have become very reluctant to reinvest in infrastructure with massive regulations along with a new wave of green energy on the horizon. They have moved to a more dividend/ Stock buybacks strategy. This is a long-term bullish sign. Without reinvestment, production will slowly fade and fall down to unserviceable levels. All while world demand is growing quite rapidly.
