Outlook: Energy markets are continuing their downtrend today marking the third consecutive day of declines. Chinese lockdowns have resurfaced in the headlines with reports of an outbreak in Chengdu. Chengdu contains 21 million citizens and accounts for 1.7% of China’s GDP. The city has reported 157 new cases and represents the largest city to lockdown since Shanghai. The demand outlook for China is trending towards 9-10 million bpd, down from 10-12 million bpd in recent years. OPEC’s Joint Technical Committee met yesterday and lowered their 2022 oil surplus by 500,000 bpd. OPEC is navigating a volatile environment with major producers such as Libya and Iraq at risk for disruption due to civil unrest. The G7 is scheduled to meet tomorrow to discuss a price cap for purchasing Russian oil. Unanimous support and discipline will be necessary for the policy to prove effective.
Crude
- China has locked down the major city of Chengdu due to a covid outbreak.
- OPEC’s JTC tightened its outlook for global oil markets this year by dropping its 2022 oil surplus by 500,000 bpd to 400,000 bpd.
- The G7 finance ministers will hold talks this week on allowing global purchases of Russian oil at a capped price.
- Libya’s exports are expected to rise to 1.15 million bpd of crude in September, up from 944,000 bpd in August.
- Six shipments of Russian crude are heading to India in August, the highest number by the country since the stream was introduced.
- Crude production rose by 100,000 bpd to 12.1 million bpd last week.
- The EIA reported a 3.3 million barrel draw in crude stocks for last week.
- As of 8:41 am CST: Brent crude oil down $2.00 to $93.64, US dollar index up $0.603 to 109.303 while the nearby e-mini S&P 500 futures contract is down 19.25 to 3937.00.
Diesel
- The EIA reported a 100,000-barrel build in diesel stocks last week.
- Diesel stocks are 34 million barrels below the 5-year average.
- Average diesel demand over the past four weeks is down 8.75% compared to last year.
- Singapore distillate stocks have jumped to 4-month highs.
Gasoline
- The EIA reported a 1.2 million barrel draw in gasoline stocks for last week.
- Gasoline stocks are 16.1 million barrels below the 5-year average.
- Average total gasoline demand over the past four weeks is down 6.37% compared to last year.
Propane
- Conway is trading at $1.0900 off a penny and Belvieu is trading at $1.090.
- Conway is trading at 51% of crude.
- The US is exporting 71% of production as of 8/19/22.
- The EIA reported a 4.2 million barrel build in propane stocks last week.
- Midwest inventories rose by 485,000 barrels but sit near 5-year seasonal lows.
Natural Gas
- Total US gas demand increased to 96.4 Bcf/d yesterday.
- Total dry production decreased to 95.7 Bcf/d.
- Overnight weather runs removed 4 CDD to the two-week forecast.
- The EIA is expected to report a 56 Bcf injection into storage.
- The 5-year average injection is 46 Bcf.
Gasoline Demand: The four-week rolling average of gasoline demand sits at 8.87 million bpd which is nearly 600,000 bpd below the 5-year average. US gas demand rose 157,000 bpd week-over-week in the second to last week of the driving season which ends on Labor Day.
