Outlook: Energies are seeing significant losses today with crude down 3% and products down ~5%. Markets are weighing macro fears along with poor demand data released yesterday. China is in the process of unwinding lockdowns, but the focus has shifted to the impact of lockdowns on their economy. China is looking at increasing fuel exports in an effort to stimulate its economy and likely help eliminate excess supply due to demand destruction. Yesterday’s EIA report revealed both gas and diesel demand is down roughly 10% compared to last year on a seasonal basis. The CPI data this week showed inflation falling at a slower than expected rate which may push the Fed to stick with a 75 basis point hike for next month. Overall, the macro scene is bearish and weighing heavily on energies. This trend may continue as long as recessionary fears remain in the spotlight.
Crude
- China’s Chengdu is easing lockdown measures in parts of the city today.
- The IEA said yesterday that China will see its biggest demand drop in more than three decades this year.
- Oil is on track for its first quarterly loss in more than two years.
- The US SPR fell by a record 8.4 million barrels last week.
- WTI’s option skew is at its least bearish level since June.
- US crude exports rose by 82,000 bpd and remain above 5-year highs.
- The EIA reported a 2.4 million barrel build in crude inventories for last week.
- Total crude stocks stand 9.9 million barrels below the five-year average.
- As of 8:51 am CST: Brent crude oil down $2.85 to $91.25, US dollar index up $0.025 to 109.683 while the nearby e-mini S&P 500 futures contract is up 3.25 to 3950.00.
Diesel
- The EIA reported a 4.2 million barrel build in diesel stocks for last week.
- Average distillate demand for the four-week week average was down 11% compared to last year.
- Diesel stocks sit 29.3 million barrels below their 5-year average.
Gasoline
- The EIA reported a 1.7 million barrel draw in gasoline stocks for last week.
- Average gasoline demand for the four-week average was down 9% last week compared to last year.
- Gasoline stocks sit 12.9 million barrels below their 5-year average.
Propane
- Conway is trading at $1.0600 and Belvieu is trading at $1.0550.
- Conway is trading at 51% of crude.
- The US is exporting 59% of production as of 9/9/22.
- The EIA reported propane inventories rose by 3.7 million barrels.
- Midwest inventories rose by 721,000 barrels.
Natural Gas
- Total US gas demand declined to 90.4 Bcf/d yesterday.
- Total dry production increased to 96.1 Bcf/d.
- Overnight weather runs were unchanged through the two-week forecast.
- The EIA is expected to report a 69 Bcf injection.
- The five-year average injection is 82 Bcf.
- NG has fluctuated significantly on the threat of a rail strike which could increase NG demand to replace stranded coal supply.
Q3 Oil: Oil is on course for the first quarterly loss in more than two years. Central banks across the globe are tightening interest rates to combat surging inflation. The macro trend change has pressure oil off its highs and sent it below even pre-war levels. Recessionary threats continue to take priority over the tightening fundamental complex.
