Outlook: Energies are edging higher this morning continuing on the bullish trend established to start the week. WTI futures have risen 10% over the past three sessions with supply concerns pressuring the market higher. OPEC’s supply cuts will go into effect just 1 month ahead of the EU’s Russian oil embargo which brings additional tightness to the market. The EU also approved another round of sanctions yesterday which supports a price cap on Russian oil products and Russia made an immediate comment that they would be ready to cut production if the price cap is applied. Analysts have projected Russia could cut as much as 3 million barrels of production due to the proposed price caps by the EU and G7. Goldman Sachs and JPMorgan both increased their Q4 oil price forecasts and expressed an increasing bullish sentiment towards the market following OPEC’s decision. Macro influences which have largely controlled the downtrend over the last 4 months likely won’t stay idle long. Increasing energy costs can be a significant driver of inflation, which could in turn influence the Fed to keep on an aggressive track for increasing interest rates.
Crude
- OPEC+ announced a 2 million bpd cut to production for November.
- The OPEC+ production cut is estimated to cut current production by ~1 million bpd.
- OPEC+ JMMC will now meet every other month and the full ministerial meetings will occur every 6 months.
- The EU approved another round of sanctions yesterday that includes support for a price cap on oil sales.
- Russia could cut its oil production by as much as 3 million bpd if the EU and US proceed with the proposed price cap.
- TotalEnergies CEO Patrick Pouyanne said the proposed Russian price cap is a bad idea and would give leadership back to Vladimir Putin.
- Goldman Sachs raised its 4Q Brent forecast by $10 to $110 following OPEC’s production cut.
- The EIA reported the 3rd lowest crude net import figure in history for last week.
- Crude exports were down 95,000 bpd at 4.5 million bpd while imports fell 502,000 bpd to 5.9 million bpd.
- The EIA reported a 1.3 million barrel draw in crude stocks for last week.
- As of 8:55 am CST: Brent crude oil up $0.31 to $93.68, US dollar index up $0.647 to 111.721 while the nearby e-mini S&P 500 futures contract is up 2.25 to 3796.00.
Diesel
- The EIA reported a 3.4 million barrel draw in diesel stocks last week.
- Diesel stocks at 110.916 million barrels are the lowest for this week since 1996.
- Diesel inventories are 28.259 million below their 5-year average.
Gasoline
- The EIA reported a 4.7 million barrel draw in diesel last week.
- Gasoline stocks are 20.175 million barrels below their 5-year average.
- US gasoline demand rose by 7% to 9.4 million and a 5-year high last week.
Propane
- Conway is trading at $0.9300 and Belvieu is trading at $0.9175.
- Conway is trading at 44% of crude.
- The US is exporting 56% of production as of 9/30/22.
- Propane stocks rose by 1.5 million barrels last week and below the estimated 2.1 million barrel build.
- Midwest inventories rose 115,000 bpd last week.
Natural Gas
- Total US gas demand declined yesterday by 1.5 Bcf/d to 88.5 Bcf/d.
- Total US dry production declined to 96.8 Bcf/d.
- The EIA is expected to report a 114 Bcf injection for last week.
- The 5-year average injection for last week is 87 Bcf.
US Gas Demand: US gas supplied increased by 640,000 bpd to 9.465 million bpd last week representing a 5-year seasonal high. Just two reports ago, gasoline demand was at 5-year low levels. The four-week rolling average for this time period remains 340,000 bpd below the 5-year average but above 5-year lows.
