Outlook: Energies have traded on both sides this morning but crude and products have moved higher over the last hour. The market is tracking the ongoing covid battle in China, which recently shut down schools in restaurants in a city of 19 million people. China is looking to stoke demand despite lockdowns by increasing their export quotas for the end of the year. Despite the increase in oil imports month-over-month, oil demand remains 2% lower than last year. Financial markets are also in the spotlight with earnings shedding light on the health of domestic business activity, after the PMI yesterday showed a contraction for the fourth month in October. The dollar index is down over 1000 ticks this morning providing support for commodities. Following the API survey this afternoon and the EIA report Wednesday morning, we'll look for fundamentals to gain more traction.
Crude
- Yesterday, China increased covid restrictions in Guangzhou, a city of 19 million people.
- Chinese crude imports remain 2% lower than last year despite the rise in October.
- Kuwait’s Al-Zour refinery anticipates full operation by January and will operate with around 615,000 bpd of crude-processing capacity.
- Saudi Arabia supplied Europe with 950,000 bpd of oil in September.
- IEA director Faitih Birol said that the IEA has a huge amount of reserve stocks ready to be released if needed but that it is currently not on the agenda.
- US waterborne crude imports rose by 880,000 bpd to 2.9 million bpd last week.
- US business activity contracted for a fourth month in October.
- Reuters estimates crude stocks rose by 200,000 bpd last week.
- The API will report its inventory survey at 3:30 CT.
- The US SPR fell by 3.4 million barrels last week to 401.8 million barrels.
- As of 8:58 am CST: Brent crude oil up $0.40 to $93.66, US dollar index down $1.013 to 110.967 while the nearby e-mini S&P 500 futures contract is up 34.25 to 3843.00.
Diesel
- China’s refiners are planning to increase oil product shipments to 6.06m tons next month, a gain of 37% m/m.
- Kuwait's Al-Zour refinery is scheduled to be up and running within a month and is expected to produce 155,000 bpd of ultra low-sulfur diesel.
- Reuters estimates diesel stocks fell by 1.1 million barrels last week.
- Waterborne diesel imports rose by 110,000 bpd to 193,000 bpd last week.
Gasoline
- Reuters estimates gasoline stocks fell by 1.2 million barrels last week.
- The Nymex RBOB prompt spread rose to its highest level since August, trading over 25 cents.
- US waterborne gasoline imports rose by 273,000 bpd to 626,000 bpd last week.
Propane
- Conway is trading at $0.8600 and Belvieu is trading at $0.8450.
- Conway is trading at 42% of crude.
- The US is exporting 42% of production as of 10/14/22.
- US corn harvest is estimated at 62% complete.
- An Oct23-Mar24 Conway swap is trading around 90 cents today. The recent lull gives an opportunity to add an early layer to next year’s winter usage and take advantage of the backwardation in the market.
Natural Gas
- Total US gas demand rose to 86.1 Bcf/d.
- Total US dry production fell to 96.9 Bcf/d.
- Overnight weather runs removed 5 HDDs through the two-week forecast.
Continuous NG: Nearby natural gas has seen a convincing downtrend since the end of August. The market may have found a bottom ahead of the heating season as demand begins to ramp up. Projections are for an inventory build between 50-60 Bcf last week, compared to four consecutive 100 bcf+ injections in weeks prior.
