Outlook: Energy markets are working marginally lower today after the volatile shortened trading session yesterday. OPEC+ met yesterday and announced a 100,000 bpd product cut for October. While the production cut had been discussed over the last month, the market was leaning towards production remaining unchanged. Crude pushed back over $90 but has since retreated back to near even today with no official close due to yesterday’s holiday. The other significant headline involved natural gas with Russia announcing they are suspending flows through Nordstream 1 indefinitely. European gas prices surged by nearly 30% following the news but have reeled back into the high $50s today. US natural gas was relatively unaffected as we are already operating at our maximum export capacity, however, the long-term outlook will be increased flows to Europe as additional capacity comes online with the given circumstance. Additional lockdowns in China are providing downside pressure against the gains observed yesterday following the OPEC+ meeting.
Crude
- OPEC+ announced a 100,000 bpd production cut during yesterday’s meeting.
- Libya’s production has dropped by about 100,000 bpd due to technical issues in two fields.
- The EU’s chief diplomat played down the prospect of a revival of the Iran nuclear deal, saying he’s “less confident today than 28 hours hour before on the convergence of negotiations.”
- Saudi Arabia cut their oil prices to Asia by nearly $4 from September.
- The G7 said on Friday they will move forward with a price cap on Russian oil purchases by December 5th.
- China locked down parts of Guiyang yesterday after 132 new cases were reported in the city of 6.1 million people.
- Nearby WTI’s 50-day moving average is on the verge of crossing its 200-day moving average for the first time since September 2020.
- Baker Hughes reported US oil rigs fell by 9 last week.
- Inventory reports will be delayed by a day this week due to the Labor Day holiday.
- As of 9:08 am CST: Brent crude oil down $2.20 to $93.54, US dollar index up $0.500 to 110.326 while the nearby e-mini S&P 500 futures contract is down 30.25 to 3895.00.
Diesel
- Global airlines have scheduled 97.3 million seats on planes in the week starting Sept 5, representing the first time in 10 weeks capacity has fallen below 100 million.
- Diesel accounted for 57% of total UK road fuel sales in the last week of August, down from about 59% in early 2020.
Gasoline
- The US driving season officially ended yesterday following the Labor Day holiday. 6 of 14 weeks posted demand over 9 million bpd compared to 73-75 weeks during 2015-2019.
- AAA reports the national average gas price at $3.779 to end the driving season, down from the peak of $5.016 on 6/14.
Propane
- Conway is trading at $1.1000 and Belvieu is trading at $1.0975.
- Conway is trading at 53% of crude.
- The US is exporting 53% of production as of 8/26/22.
Natural Gas
- Total US gas demand decreased to 92.2 Bcf/d yesterday.
- Total dry production increased to 96.7 Bcf/d.
- Overnight weather runs removed 9 CDD to the two-week forecast.
- Russia announced they are halting gas flows through Nordstream 1 indefinitely following scheduled maintenance over the weekend.
Daily Continuous WTI: Nearby crude remains on a downtrend after peaking in early June. The 50-day moving average represented by the blue line is on the verge of crossing the 200-day moving average represented in red. The move could signal further downside moves in the short term.
