Outlook: Energies are pushing lower today and are on pace for a weekly loss. The complex made a convincing bullish run last week on tightening fundamentals however, macro influences appeared to take control again this week. US inflation remained resistant to the Fed’s rate hikes thus far and will likely motivate them to stay on a hawkish track. Elevated energy prices have provided support to the falling inflation index. China is also in focus this week as they come off their weeklong holiday. Overnight data showed a significant drop in travel over the holiday and rising covid cases have Shanghai prepared for a potential lockdown. The EIA and IEA both reduced their demand forecast for 2023 and the overall threat of global recession continues to keep a lid on upward market moves.
Crude
- During China’s national holiday Golden Week, flights were down by 42% y/y according to China Aviation Daily.
- Chinese road travel during Golden Week was down 30% y/y according to the Ministry of Transport.
- The White House has accused Saudi Arabia of coercing other OPEC+ countries into agreeing to the 2 million bpd production cut last week.
- Russia’s Deputy Prime Minister Alexander Novak said crude exports this year are set to grow 8% year-over-year.
- The EIA reported a 9.8 million barrel build in crude stocks last week.
- US crude production fell by 100,000 bpd to 11.9 million bpd.
- Net petroleum inventories including the SPR rose by 343,000 barrels.
- Baker Hughes will report their rig count at 12:00 CT.
- As of 9:06 am CST: Brent crude oil down $1.98 to $92.59, US dollar index up $0.699 to 113.062 while the nearby e-mini S&P 500 futures contract is down 19.25 to 3663.00.
Diesel
- The diesel crack closed at a record level of $82.87 yesterday.
- The EIA reported a 4.8 million barrel drop in diesel stocks last week.
- US diesel demand increased by 265,000 bpd.
- Diesel stocks are at their lowest levels since 1996.
Gasoline
- The EIA reported a 2 million barrel build in gasoline stocks last week.
- US gasoline demand fell by 1.2 million bpd back to 5-year lows.
- President Biden criticized high gas prices yesterday and said he’d announce new actions next week.
Propane
- Conway is trading at $0.8500 and Belvieu is trading at $0.8400.
- Conway is trading at 40% of crude.
- The US is exporting 61% of production as of 10/7/22.
- The EIA reported a 1.1 million barrel build in propane stocks last week.
- Midwest inventories rose 399,000 barrels.
Natural Gas
- Total US gas demand increased to 92.8 Bcf/d.
- Total US dry production decreased to 95.1 Bcf/d.
- Overnight weather runs removed 3 HDDs through the two-week forecast.
- The EIA reported a 125 Bcf injection last week.
- The 5-year average injection is 82 Bcf.
- Inventories are 6.4% below the 5-year average.
Days of Supply: Heating costs this winter are seen rising to their highest level in 25 years. With temperatures starting to fall, the US has just 26-day supply of heating oil to draw on, which is the smallest level for this time of year in roughly three decades. US inventories are at their lowest seasonal level since 1982.
