Outlook: Energies were lower overnight and have since bounced well off of their lows early this week. Demand fears as well as a strong dollar and potential interest rate hikes have put a lot of downward pressure on the market. Tight supplies as well as the potential for the US government to buy back oil to fill the SPR are giving some bullish headlines for the market to chew on.
Crude
- The FED is likely to announce another interest rate hike this Wednesday and the market is torn between 75 bps and 100 bps.
- There are reports that OPEC and its members missed their production quotas by as much as 3.5 million barrels per day.
- The EU has become rather fed up with Hungary and is threatening to withhold 7.5 billion Euros set to go to Hungary if leadership doesn’t change its attitude toward Russian and also thwart further corruption in its own government.
- Iran is set to lower its crude oil price for October for its Asian shipments to +$5.55 per barrel.
- Floating crude storage fell 7.3% in the past week.
- Baker-Hughes Rig count showed 4 rigs were added in the US with 6 more added in Canada.
- Chinese demand is estimated to actually be lower for 2022 than in 2021.
- As of 9:03 am CST: Brent crude oil is down $1.08 to $90.32, the US dollar index is up $0.217 to 109.979 while the nearby e-mini S&P 500 futures contract is down 17 at 3872.50.
Diesel
- The technical analysis shows that the ULSD market is very oversold at this point following last week’s 56-cent downswing.
- Tight physical supply could point to support and the market may bounce back today.
- Last week the funds were net sellers of 3,472 contracts.
Gasoline
- There has been an additional supply added to the market in the form of increased Chinses exports.
- Last week the funds were net sellers of 4,693 contracts adding an additional bearish sentiment.
Propane
- 1.0200 Conway and Belvieu at 1.0000.
- The market has come off quite a bit as oil and products have fallen. Propane continues to be detached from Natural gas.
- Last week saw a much larger than expected build and is consistent with a strong build season so far.
Natural Gas
- Pakistan is planning to build a 500 million dollar LNG terminal which will allow for the growing demand for natural gas to be met in Pakistan. It will take 4 years to build.
- Nat Gas basis has taken a big hit as we move closer to the beginning of the draw season.
UAE Production Increase: The UAE announced that they plan to accelerate its plans to increase its oil output. Their goal is to produce more than 5 million barrels per day in 2025. They moved this deadline up from a previously announced deadline of 2030.
