Outlook: Crude and products are working lower this morning with crude down over 5%. OPEC+ is considering a 500,000 bpd increase in production for next month and the market pushed to fresh lows following the headline this morning. Talks of the production increase emerged after the Biden Administration told a federal court judge that Saudi Crown Prince Mohammed bin Salman should have sovereign immunity from a federal lawsuit related to the killing of a Saudi journalist. Additional downward pressure continues out of China as covid cases climb and restrictions grow. The G7 is expected to announce a price cap level on Wednesday which will be something to keep an eye out for. A strong response from Russia could provide large market swings ahead of the holiday with trade becoming thin.
Crude
- OPEC+ is considering a production increase of 500,000 bpd according to the WSJ.
- China reported 27k covid cases yesterday.
- Schools in some districts in Beijing have switched to online classes, while Guangzhou ordered a five-day lockdown for its most populous districts.
- Goldman estimates Chinese demand may fall by 1.2 million bpd this quarter due to lockdowns
- The G7 nations plan to announce at what level they will set a price cap on Russian crude oil Wednesday.
- Crude oil in floating storage increased by 12% over the last week.
- A frack-sand plant in the Eagle Ford region of Texas erupted in flames over the weekend.
- Baker Hughes reported total rigs increased by 1 to 623 last week.
- The COT reported showed net spec and fund long in crude oil at 338k contracts, which was near the longest levels since mid-July.
- Today is the last trade day for December WTI futures.
- As of 9:50 am CST: Brent crude oil down $4.63 to $82.99, US dollar index up $0.783 to 107.713 while the nearby e-mini S&P 500 futures contract is down 28.25 to 3945.00.
Diesel
- Last week’s COT showed managed money traders net sold 1,816 contracts and are net long 27,948 contracts.
- Energy Aspects estimates that European diesel stockpiles will rise by 22 million barrels through January.
Gasoline
- Last week’s COT showed managed money traders net sold 4,010 contracts and are net long 56,610 contracts.
- AAA reports the national average retail gas price at $3.662.
Propane
- Conway is trading at .8650 while Belvieu is trading at .8550.
- Conway is trading at 45% of crude.
- The US is exporting 61% of production as of 11/11/22.
Natural Gas
- Total US gas demand rose to 128.2 Bcf/d.
- Total US dry production up to 97.5 Bcf/d.
- Overnight weather runs removed 10 HDDs through the two-week forecast.
- Freeport LNG is targeting mid-December for a restart and expects to have 2 Bcf/d of production back online by January.
- Baker Hughes reported natural gas rigs rose by 2 to 157 last week.
Continuous WTI: Nearby crude is working lower, and testing support levels last seen at the end of September. Crude has been in a downtrend since June driven by demand concerns and rising interest rates. An announcement today that OPEC is considering increasing production by 500,000 bpd has pressured the market to fresh daily lows.
