Outlook: Energies are trading higher again this morning with momentum in the market remaining consistent this week. The market saw a boost this morning from a higher-than-expected Q3 GDP figure of 2.6% vs 2.4%. Overall, the macroeconomic sentiment has turned more bullish this week which has pushed the US dollar lower and supported the complex. Yesterday’s EIA report supported the trend of the week reporting a net petroleum draw of 5 million barrels including the SPR. Petroleum exports also pushed to a record level at 11.4 million barrels which included record US crude exports at 5.1 million barrels. Padd 1b, which represents New York Harbor inventories for both gasoline and diesel, fell last week which has increased the backwardation substantially in the prompt contract for each ahead of expiration. The market will quickly put fundamentals behind it and begin looking ahead to the Fed meeting next Tuesday and Wednesday.
- The US has been forced to scale back a plan to cap Russian oil prices after growing skepticism by investors and increasing risk in financial markets due to crude volatility.
- The US economy grew at an annualized rate of 2.6% in Q3 vs 2.4% expected.
- US petroleum exports rose to a record 11.4 million barrels last week.
- The US SPR fell by 3.4 million barrels last week to 401.8 million barrels.
- US crude exports rose by 991,000 bpd to 5.1 million bpd last week.
- The EIA reported a 2.6 million barrel build in crude stocks last week.
- US crude inventories are 9.1 million barrels above last year’s levels and 8.1 million barrels below the 5-year average.
- As of 8:31 am CST: Brent crude oil up $1.09 to $96.78, US dollar index up $0.678 to 110.387 while the nearby e-mini S&P 500 futures contract is up 20.25 to 3861.00.
- The EIA reported a 170,000 barrel build in diesel stocks last week.
- Diesel inventories are 24.8 million barrels below the five-year average.
- US diesel demand fell by 194,000 bpd to 3.9 million bpd last week.
- The prompt diesel inverse traded as high as 55 cents yesterday.
- The EIA reported a 1.5 million barrel draw in gasoline stocks last week.
- Gasoline inventories are 12.3 million barrels below the 5-year average
- US gasoline demand rose by 252,000 bpd to 8.9 million bpd last week.
- The prompt gasoline inverse traded as high as 39 cents yesterday.
- Conway is trading at $0.8825 and Belvieu is trading at $0.8850.
- Conway is trading at 42% of crude.
- The US is exporting 71% of production as of 10/21/22.
- The EIA reported propane inventories rose by 853,000 barrels last week.
- An Oct23-Mar24 Conway swap is trading around 90 cents this week. 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.
- Total US gas demand rose to 92.9 Bcf/d.
- Total US dry production fell to 96.4 Bcf/d.
- Overnight weather runs removed 7 HDDs through the two-week forecast.
- The EIA is expected to report a 65 Bcf injection into storage.
- The 5-year average injection for this time period is 66 Bcf.
Russian Price Cap: The originally proposed price cap by the US and EU was expected to be between $40 and $60 to prevent Russian from gaining sizable revenue. The average delivery price for Urals crude was $63/bbl over the past three years while it has averaged $74/bbl this month. The price cap is expected to be announced before Dec 5th, when EU sanctions go into full effect.