Outlook: Energies are finding strength for the second consecutive day with crude pushing past $85 for the first time in two weeks. Products are also finding strength both up ~10 cents to start the morning. The backwardation in crude and products has continued to increase over the last month fueled by planned/unplanned refinery shutdowns, returning Chinese demand, and the impending EU oil embargo driving export demand. The headline focus this week is on the OPEC meeting scheduled for tomorrow morning. The group is expected to cut production by over 1 million bpd, while Citigroup says a cut of 2 million barrels may be necessary to hold values that have been priced in ahead of the meeting.
Crude
- OPEC is considering a production cut of over 1 million bpd for November.
- OPEC+ will officially meet on Wednesday to finalize a cut.
- OPEC production rose 230,000 bpd to 29.89 million bpd in September according to Bloomberg.
- Saudi Aramco’s CEO reiterated its warning that producer spare capacity is running low and could tighten further if China ends its covid zero policy.
- Crude held on tankers off China dipped to 12 million barrels this week, down from 49 million barrels a year ago.
- US waterborne imports fell by 1 million bpd to 2.1 million bpd last week.
- The US SPR fell by 6.2 million barrels last week.
- Reuters estimates crude stocks rose 2 million barrels last week.
- The API will report its inventory survey at 3:30 CT.
- As of 9:37 am CST: Brent crude oil up $3.63 to $88.77, US dollar index down $0.430 to 111.679 while the nearby e-mini S&P 500 futures contract is up 64.25 to 3665.00.
Diesel
- Reuters estimates diesel stocks fell 1.8 million barrels last week.
- US waterborne diesel imports rose by 99,000 bpd last week.
- Wage strikes at a France refinery are set to continue for an 8th consecutive day.
Gasoline
- Reuters estimates gasoline stocks fell 1.1 million barrels last week.
- US waterborne gasoline imports fell by 72,000 bpd last week.
- US gasoline imports from Europe fell by 15% to 239,000 bpd.
Propane
- Conway is trading at $0.8725 and Belvieu is trading at $0.8650.
- Conway is trading at 44% of crude.
- The US is exporting 58% of production as of 9/23/22.
- Propane has pulled away from crude to start October, resisting the upside moves in the complex.
- US corn harvest is 20% complete while the 5-year average is 22% for this time period.
Natural Gas
- The Natural gas storage deficit sits at 306 Bcf against the 5-year average.
- Reuters estimates an injection last week between 94-119 Bcf.
- The 5-year average injection for last week is 87 Bcf.
US Gas Prices: After falling for nearly 100 days, the national average gas price at the pump has increased 12 of the last 13 days. Declining imports and refinery turnarounds are beginning to put stress on supply. The backwardation in the prompt RBOB contracts has increased by nearly 10 cents since September.
