Outlook: Energies are bouncing back today after yesterday’s selloff. The FED’s announcement of an increase in interest rates has hurt the US dollar just enough for commodities to make a comeback overnight and into this morning. I would be remiss if I did not mention that the US dollar is in the midst of a multi-decade breakout. Chinese demand looks to be back on the mend as refiners pick up the pace to meet export quotas. This could see prices rebound especially in crude but could have the opposite effect on products. I believe however that we have already priced in the negatives to products over the last two weeks.
Crude
- Experts predict that Russia will lose 1.1 to 1.3 million barrels in oil output due to the EU ban that is set to take effect at the end of this year.
- 2 workers have passed away as a result of the fire at BP’s refining facility in Oregon, Ohio. The facility is expected to be shut down for 10-14 days as repairs are made and OSHA safety requirements are met.
- Hurricane Fiona’s status has been upgraded to a Category 4 as it is expected to make landfall in Bermuda soon. Following that the storm is expected to move towards Canada’s SE coast.
- China’s demand for crude oil is looking to pick back up as refineries look to ramp up production to meet export quotas.
- The UK oil industry is looking to more fracking to meet growing supply issues, however, there is very little support to be found amongst the public.
- The next OPEC meeting is scheduled for October 5th, until then we can expect the market to weigh the supply risk from Russia against the demand concerns from a recession.
- As of 8:22 am CST: Brent crude oil up $2.85 to $92.75, US dollar index up $0.200 to 11.840 while the nearby e-mini S&P 500 futures contract is down 6.25 to 3800.00.
Diesel
- The market was weaker yesterday following a bearish inventory report.
- Look for refineries to shut down operations for turnarounds this fall as they have been running extremely hard through historically great crack margins.
Gasoline
- US refinery rates moved higher to 93.6% of capacity last week.
- Ethanol output dipped to its lowest seasonal output in the last 6 years.
Propane
- 1.0000 Conway and Belvieu at 0.9750 This is the first time in a very long time that we have seen prices dip below $1.
- There was a larger than expected build in inventories in yesterday’s report, which made prices move lower. This is all while Midwest inventories are at 10-year lows.
- These prices are starting to look quite favorable in 2023 and 2024 and locking in pricing may not be a bad option.
Natural Gas
- The market is expecting a 92-99 BCF injection into supply in this week’s inventory report.
- Turkey’s president made comments about his country’s increasing eagerness to buy more US LNG moving forward.
US Dollar Breakout: The US dollar is breaking out of its nearly ten-year trade range between 90 and 102. This has made exports from the US very challenging as customers abroad have to pay for US goods in US dollars while they have to turn around and sell them in a different currency. We may look to challenge the highs set back in 2000-2002 and if we break through that there is very little resistance remaining from the charts.
