Outlook: Energies are sliding lower and are on pace for their second consecutive weekly loss. Demand concerns have outpaced supply risk over the last two weeks which have prompted a volley of selling. Demand concerns and positional adjustments have pushed the prompt WTI spread into contango, a market dynamic we haven’t seen in over a year. December crude is trading over a 30-cent discount to January. The trade will continue to focus on the rising covid cases in China and whether or not it will force them to implement additional mobility restrictions. Until we see another significant threat to supply, energies may look to move lateral or lower in the short term. This selloff may present buying opportunities before the implementation of the EU’s oil embargo and price cap on December 5th.
Crude
- China reported 24,000 new covid cases Thursday, which is the highest number reported since Shanghai.
- The US Government said in a panel discussion yesterday that they will provide further guidance on the Russian oil price cap within the coming days.
- Senator Joe Manchin said yesterday he doesn’t support requiring oil companies to store more fuel.
- The prompt WTI spread has flipped from an inverse to a carry for the first time since 2021.
- Globally refinery outages rose to 2.32 million bpd this week.
- Baker Hughes will report its rig count at 12:00 CT.
- US crude production since April has fluctuated between 11.9 – 12.1 mbpd while oil rigs have risen from 548 to 622 during the same period.
- As of 8:28 am CST: Brent crude oil down $3.61 to $86.17, US dollar index down $0.042 to 106.652 while the nearby e-mini S&P 500 futures contract is up 35.25 to 3990.00.
Diesel
- December ULSD is trading below its 50-day moving average of $3.5012.
- China exported 255,000 bpd in October, down from September.
Gasoline
- December RBOB closed below its 50-day moving average of $2.4754 yesterday.
- Average US pump prices have fallen 9 cents over the last week and AAA anticipates pump prices will continue to fall through Thanksgiving.
Propane
- Conway is trading at .8725 while Belvieu is trading at .8625.
- Conway is trading at 45% 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 125.3 Bcf/d.
- Total US dry production up to 96.9 Bcf/d.
- Overnight weather runs removed 4 HDDs through the two-week forecast.
- The EIA reported a 64 Bcf injection into storage last week.
- The inventory deficit to the 5-year has narrowed to just 7 Bcf following the build.
WTI Spread: The prompt WTI spread moved lower again today and has flipped from an inverse to a carry. This market dynamic can signal ample or excess supply in the short term, while the rest of the curve remains backwardated.
