Outlook: Energy markets are mixed to start the day with crude and gas finding strength while diesel trades lower. Energies as a whole are relatively oversold following the week of steep losses. Oil has fallen nearly 11% over the past three days with various bearish market movers entering the headlines. Chinese lockdowns and recessionary signals hold a strong grip on the market and have prevented significant upside moves. Oil has found support near $85 which it has tested multiple times over the past few weeks following selloffs. Supply fundamentals remain relatively bullish, however, the tightening market is being offset by continuous threats to demand. OPEC+ will meet on Monday next week where they are expected to keep production steady. The possibility for a production cut did gather discussion following comments from Saudi Arabia but given some of the civil unrest occurring with major producers, the chance grows more unlikely.
Crude
- Oil has fallen nearly 11% over the past three days.
- The G7 finance ministers agreed on a Russian oil price cap.
- Russia has said it won’t sell oil to anyone participating in the price cap.
- The US called Iran’s response to the latest effort to revive the nuclear deal “not constructive.”
- FGE estimates some European refiners may see their cost of production increase by $10/barrel due to elevated natural gas prices.
- OPEC+ is expected to keep output steady when it meets on Monday next week.
- China has locked down the city of Chengdu which contains 21 million people.
- US non-farm payrolls were reported at 315k, exceeding the consensus of 300k.
- Baker Hughes will report their rig count at 12:00 CT.
- As of 9:24 am CST: Brent crude oil up $2.34 to $94.70, US dollar index down $0.499 to 109.192 while the nearby e-mini S&P 500 futures contract is up 30.25 to 3999.00.
Diesel
- ARA gasoil stocks have risen to their highest level since January.
- Diesel crack margins remain well supported compared to gasoline.
Gasoline
- The Biden administration is expected to announce 3 years of biofuel blending mandates in November.
- The nearby RBOB crack traded to a low of $10.65 yesterday and its lowest level since January 2021.
Propane
- Conway is trading at $1.1000 and Belvieu is trading at $1.1000.
- Conway is trading at 51% of crude.
- The US is exporting 53% of production as of 8/26/22.
- 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 decreased to 95.5 Bcf/d yesterday.
- Total dry production increased to 96.5 Bcf/d.
- Overnight weather runs removed 2 CDD to the two-week forecast.
- The EIA reported an injection of 61 Bcf
Refinery Outages: Global refinery outages were estimated at 1.23 million bpd, compared with 858,000 bpd last week according to Bloomberg data. Roughly 566,000 bpd of refining capacity was offline in the US, and 67,000 bpd in Russia.
