Outlook: Energies are falling for the second consecutive day with a lack of bullish news allowing for macros to increase their influence. Chinese demand remains vulnerable to demand destruction with rising covid cases following their holiday last week. Their flagship newspaper has continued to endorse the covid zero policy in place which relinquished hope that they would ease lockdown stipulations. China has increased crude purchases over the last month in order to prepare for their export quota as they look to take advantage of favorable crack spreads. The diesel market has become increasingly volatile ahead of the heating season and the EU’s Russian oil embargo going into effect on December 5th. France, who has been dealing with wage strikes at three major refineries, said they may seize control to return production as supplies continue to tighten. The market continues to show signs that the current refining capacity may not be able to keep pace with demand as supplies tighten while margins remain high.
- The White House said they will re-evaluate their relationship with Saudi Arabia after OPEC’s decision on output.
- Chinese covid cases are on the rise following their week-long holiday.
- The Chinese Communist Party’s flagship newspaper endorsed the country’s covid zero policy, reducing speculation that President Xi Jinping would relax covid controls.
- Iran protests have spread to a key refinery in Abadan, which played a crucial role in the 1979 revolution.
- Crude floating storage fell by 6% last week.
- Asian refiners have bought around 12 million barrels of US crude in the past two weeks according to Bloomberg.
- Russian seaborne crude exports to Europe fell for a fourth week while shipments to Asian customers rose for a fourth week according to Bloomberg tracking data.
- Waterborne crude imports rose by 458,000 bpd to 2.65 million barrels last week according to Bloomberg.
- US inventory reports are delayed by a day due to the Monday Holiday.
- As of 9:00 am CST: Brent crude oil down $1.28 to $94.91, US dollar index down $0.006 to 113.145 while the nearby e-mini S&P 500 futures contract is down 40.25 to 3584.00.
- The French government is threatening to take control of some of the country’s refineries that have been halted by wage strikes.
- Diesel will be a priority in China’s recent export quota with diesel crack spreads remaining elevated.
- Waterborne diesel imports fell by 38,700 bpd last week to 175,800 bpd.
- Waterborne gasoline imports rose by 157,500 bpd last week to 613,000 bpd.
- Three west coast refineries have delayed fall maintenance to 2023 due to tight supplies and healthy margins.
- Conway is trading at $0.8700 and Belvieu is trading at $0.8600.
- Conway is trading at 41% of crude.
- The US is exporting 56% of production as of 9/30/22.
- Total US gas demand decreased to 87.0 Bcf/d.
- Total US dry production increased to 97.2 Bcf/d.
- Overnight weather runs removed 5 HDDs through the two-week forecast.
Diesel Cracks: Diesel cracks are falling again today after peaking at $78.67 during yesterday’s session. Diesel’s premium to gas extended to an all-time high yesterday of $1.37, excluding the squeeze at the end of April which pushed to spread over $1.67 as the contracts expired. Refiners across the globe are finding incentives to produce as much diesel as possible with the absence of Russian products putting additional stress on tight supply.