Outlook: Energies are looking for direction to start the morning following the selloff yesterday that pushed crude down to 9-month lows. Interest rates are increasing across the globe as countries attempt to suppress surging inflation. Both the ECB and BoC increased interest rates by 75 bps this week, with the US expected to see a similar increase towards the end of the month. China is one of the world's largest crude consumers and they continue to lockdown cities to combat covid outbreaks. The effect on their economy from lockdowns could cause prolonged demand concerns even when cases subside. The EIA will release their inventory report a half hour late today. The API survey showed a significant build in crude while other estimates are calling for draws.
Crude
- China extended the lockdown in the major city of Chengdu after 116 new cases were reported yesterday.
- The EIA cut its production forecast for 2023 for the third month in a row.
- The EIA expects annual petroleum usage globally to rise by 2 million bpd through next year.
- JPMorgan believes further cuts from OPEC+ may be necessary to balance the market, estimating a cut of 1 million bpd may be needed.
- WTI’s prompt spread fell to its weakest level since January yesterday.
- WTI closed below its lower Bollinger band.
- The Bank of Canada hiked interest rates by 75 bps yesterday.
- The European Central Bank raised interest rates by 75 bps today.
- Reuters is estimating a 300,000 barrel draw in crude stocks last week.
- The API reported crude inventories rose by 3.6 million barrels last week.
- The EIA will report inventories at 10:00 CT.
- As of 8:22 am CST: Brent crude oil up $0.86 to $88.86, US dollar index up $0.261 to 110.101 while the nearby e-mini S&P 500 futures contract is down 24.25 to 3955.00.
Diesel
- Reuters is estimating a 500,000 barrel build in diesel stocks last week.
- The API reported diesel inventories rose by 1.8 million barrels last week.
- California’s diesel demand is surging as they load up on fuel for generators to manage rolling blackouts.
Gasoline
- Reuters is estimating a 1.7 million barrel draw in gasoline stocks last week.
- The API reported gasoline inventories fell by 800,000 barrels last week.
Propane
- Conway is trading at $1.0850 and Belvieu is trading at $1.0875.
- 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 94.9 Bcf/d yesterday.
- Total dry production decreased to 96.3 Bcf/d.
- Overnight weather runs added 4 CDD to the two-week forecast.
- The EIA is expected to report a 55 Bcf injection into storage for last week.
- The 5-year average injection is 65 Bcf.
Oil Exploration: The number of completed rounds of offshore leasing in the first eight months of 2022 is half of what it was in 2021. The total rounds completed for 2022 is on pace for their lowest level since 2000 according to Rystad Energy.
