Outlook: Energies are again finding strength for the fifth consecutive day with oil heading for its biggest weekly gain since March. WTI closed above its 50-day moving average yesterday for the first time since June and has tested $90 today. The inverse in crude and products have continued to expand this week with the concern of near-term supply tightness growing. Diesel has been the strongest market in energy this week and is testing $4 today after opening the week at $3.2650. Depleted inventories ahead of a strong demand season both domestically and globally are helping drive the market. The US is exploring opportunities to replace crude production lost from OPEC’s cut however refining capacity may be the underlying bottleneck. Product inventories have failed to recover back to seasonal norms despite refinery utilization operating near 5-year highs for most of the year. A shift in the trend appears to be forming in the near term with supply concerns overpowering recessionary threats this week.
Crude
- OPEC+ secretary general, Haitham Al Ghais, said the decision to cut production was not politically driven and was based on indications that a global recession is approaching.
- Senate Majority leader Chuck Schumer said that the NOPEC bill and other legislative tools are being considered, allowing the US to sue members of OPEC for manipulating prices.
- The number of tankers signaling China climbed to the highest level since late April according to Bloomberg data.
- BNEF says the break-even price for US oil producers would stay below $50 a barrel if the carbon tax in the Clean Competition Act were to come to pass.
- The prompt WTI spread is at its highest level in 3-weeks with growing near-term supply risk.
- WTI closed above its 50-day moving average for the first time since late-June yesterday.
- Baker Hughes will report its rig count at 12:00 CT.
- According to Baker Hughes, global rigs rose by 28 from August to September to 1,853.
- US rigs fell by 1 in September.
- US nonfarm payrolls rose 263k (est. 255k) while unemployment fell to 3.5% from 3.7%.
- As of 8:57 am CST: Brent crude oil up $1.71 to $96.13, US dollar index up $0.283 to 112.541 while the nearby e-mini S&P 500 futures contract is down 76.25 to 3680.00.
Diesel
- Marathons Garyville Refinery had a fire on Wednesday which resulted in injury to two workers. The refinery is the third largest in the US and in the process of a turnaround.
- Diesel cracks have rallied to their highest levels since June nearing $76.
Gasoline
- Global refinery outages reached 3.86 million bpd as of Oct 6 according to Bloomberg.
- The French government may release additional strategic fuel stocks to ease shortages caused by their ongoing refinery strike.
Propane
- Conway is trading at $0.9300 and Belvieu is trading at $0.9275.
- Conway is trading at 44% of crude.
- The US is exporting 56% of production as of 9/30/22.
Natural Gas
- Total US gas demand declined yesterday by 0.8 Bcf/d to 89.0 Bcf/d.
- Total US dry production declined to 96.7 Bcf/d.
- The EIA reported a larger-than-expected injection of 129 Bcf yesterday.
- The 5-year average injection for last week is 87 Bcf.
- Over the last four weeks, natural gas storage has increased 412 Bcf.
Chinese Imports: The number of tankers signaling for China climbed to the highest level since late April. Conversely, tankers headed for the US fell from last week’s two-year high according to Bloomberg. 110 tankers are bound for China over the next three months as Chinese demand attempts to rebound from lockdown lulls.
