Outlook: Energies are continuing the downward trend today with crude and products observing losses. Decreasing geopolitical tensions and falling demand forecasts appear to be the market drivers this week. NATO and Poland confirmed the stray missile was likely from Ukraine’s defense system reducing speculation that NATO would take defensive action. China continues to report rising covid cases while reducing crude volumes from their main suppliers for December. Analysts have continued to drop their Chinese demand forecasts for the end of this year and next which has put pressure on the market. WTI’s prompt spread is at its weakest level since September which may be driven by the prospect of demand destruction. OPEC+'s 2 million bpd production cut is in effect this month and may act to offset some of the threats to demand.
Crude
- Chinese refiners have asked to reduce Saudi crude volume in December and are also slowing Russian crude purchases, according to Reuters.
- China reported 23,276 new covid cases yesterday, up from 20,199 the day prior.
- Petro-Logistics believes OPEC’s crude exports will be down by as much as 1 million bpd in November.
- Poland and NATO said on Wednesday that the missile that hit Poland was probably a stray fired by Ukraine’s air defenses and not a Russian strike.
- Saudi Arabia may invest tens of billions of dollars in South Korea who represents one if its main oil customers.
- Rystad Energy has cut its China oil demand growth forecast to 900,000 bpd from 1.3 million bpd, citing covid policies and recession probabilities.
- WTI’s prompt spread is at its weakest level since late September.
- The US SPR fell by 4.1 million barrels last week.
- The EIA reported crude inventories fell by 5.4 million barrels last week.
- Crude imports fell to their lowest level since May 2021 at 5.5 million bpd.
- As of 7:45 am CST: Brent crude oil down $1.18 to $91.68, US dollar index up $0.664 to 106.945 while the nearby e-mini S&P 500 futures contract is down 47.25 to 3921.00.
Diesel
- The EIA reported distillate inventories rose by 1.1 million barrels last week.
- US diesel demand fell 7% last week to 3.8 million bpd.
- China’s diesel output in October rose 30.5% y/y to a record 18.829 million tons.
Gasoline
- The EIA reported gasoline inventories rose by 2.2 million barrels last week.
- US gasoline demand fell 3% last week to 8.7 million bpd.
Propane
- Conway is trading at .8925 while Belvieu is trading at .8750.
- Conway is trading at 44% of crude.
- The US is exporting 61% of production as of 11/11/22.
- The EIA reported propane inventories rose by 73,000 barrels last week.
- Midwest inventories rose by 283,000 barrels.
Natural Gas
- Total US gas demand rose to 122.8 Bcf/d.
- Total US dry production down to 97.1 Bcf/d.
- Overnight weather runs added 9 HDDs through the two-week forecast.
- The EIA is expected to report an injection between 50-75 Bcf.
Saudi Exports: Saudi Arabia has cut oil exports sharply this month in cooperation with their OPEC+ agreement. Exports were down by 430,000 bpd through the first half of November according to Kpler. Chart sourced from Bloomberg.
