Outlook: Energies are starting the day lower as covid continues its presence in China. China saw another uptick in cases over the weekend with 5,000 new cases reported representing a 27% increase from Saturday. While future demand remains a concern, China still reported a month-over-month increase in crude purchases which is mostly supported by their increased export quota. The US dollar index is down over 400 ticks again this morning after a historic selloff last week. Volatility in the broader markets may continue with US elections on the schedule this week. A weaker dollar may help offset any moves lower in energy if covid cases continue to climb in China.
Crude
- According to their health officials, China will continue with its covid zero policies as it faces increasingly serious outbreaks.
- China bought 10.2 million bpd of oil in October according to customs data released today. This represents a 4% increase from September.
- Russia’s seaborne crude shipments jumped to a five-month high last week to 3.6 million bpd according to Bloomberg data.
- Kazakhstan’s oil production hit an eight-month high with output reaching 425,000 bpd which is around 95% of their total capacity.
- Kuwait is starting commercial operations of the first phase of the Al-Zour refinery project.
- Global crude oil in floating storage fell by 18% this week with European floating storage down by 32% and US Gulf floating storage down by 77%.
- Baker Hughes reported an increase in rigs for the third straight week with US rigs increasing by 3 last week.
- US rig counts have increased 40% YoY.
- As of 9:30 am CST: Brent crude oil down $0.40 to $98.17, US dollar index down $0.461 to 110.416 while the nearby e-mini S&P 500 futures contract is up 3.25 to 3782.00.
Diesel
- Last week’s Commitments of Traders report showed managed money traders increased net length by 1,405 contracts to 25,259 contracts.
- Increases covid cases in China are providing bearish pressure to diesel with demand remaining suppressed while exports increase.
Gasoline
- Last week’s Commitments of Traders report showed RBOB managed money traders reduced their net long position by 2,398 contracts to a net long of 53,289 contracts.
- US gasoline stocks sit at a 7.6 million barrel deficit to year-ago levels.
Propane
- Conway is trading at 42% of crude.
- The US is exporting 57% of production as of 10/21/22.
- Propane hubs finished the week at one-month highs.
- Colder weather should support propane demand over the next few weeks.
Natural Gas
- Total US gas demand rose to 90.3 Bcf/d.
- Total US dry production fell to 96.0 Bcf/d.
- Overnight weather runs added 28 HDDs through the two-week forecast.
- US natural gas rig counts fell by 1 last week to 155.
Continuous NG: Nearby natural gas gapped higher to start the week as weather forecasts turned drastically colder. Overnight weather runs added 28 heating degree days to the two-week forecast.
