Outlook: Energies are seeing a bounce after WTI traded to a yearly low yesterday. China is taking a proactive approach to increasing vaccinations for the elderly, varying from their typical measures of mobility restrictions. The market will closely monitor the ongoing protests and any retaliation that may come from the government if it escalates. There’s growing speculation that the ongoing covid battle in China may prompt OPEC to deliver additional production cuts when they meet next week, among various other drivers. OPEC’s previous 2 million bpd production cut has shown little effect on the market so far through November. Domestically, crude inventories are expected to fall once again last week. Elevated refinery rates and a slowdown in SPR draws are putting pressure on crude stocks, which may fall to a 7-week low if verified by the EIA tomorrow.
Crude
- Protests are ongoing in China against their Covid-Zero policy and is considered the largest public protest since Tiananmen Square in 1989.
- Chinese health officials said they plan to speed up Covid vaccinations for elderly people.
- Eurasia Group suggested yesterday that weakened demand from China could prompt OPEC to consider another production cut during their next meeting.
- OPEC+ is scheduled to meet on December 4th.
- The EU failed to agree on a price cap yesterday, with Poland insisting it should be set lower than the proposed level by the G7 between $65-$70.
- The UAE’s main energy company, Abu Dhabi National Oil Co, said it will boost investment to $150 billion over the next five years to speed up increases in oil production.
- Waterborne crude imports fell by 835,000 bpd to 1.9 million bpd last week.
- The US SPR fell by 1.4 million barrels last week.
- Reuters estimates crude inventories fell by 2.5 million barrels last week.
- The API will report their inventory survey at 3:30 CT.
- As of 8:03 am CST: Brent crude oil up $1.92 to $82.11, US dollar index up $0.051 to 105.732 while the nearby e-mini S&P 500 futures contract is up 2.25 to 3972.00.
Diesel
- Reuters estimates distillate inventories rose by 1.4 million barrels last week.
- Waterborne diesel imports rose by 87,600 bpd to 131,400 bpd last week.
- Reuters estimates gasoline inventories rose by 1.6 million barrels last week.
- Waterborne gasoline imports fell by 100,700 bpd to 400,700 bpd last week.
Propane
- Conway is trading at .8225 while Belvieu is trading at .8250.
- Conway is trading at 44% of crude.
- The US is exporting 61% of production as of 11/18/22.
Natural Gas
- Total US gas demand rose to 102.9 Bcf/d.
- Total US dry production up to 98.3 Bcf/d.
- Overnight weather runs removed 2 HDDs through the two-week forecast.
OPEC Cuts: OPEC is expected to consider additional supply cuts when they meet next week. Dwindling demand outlooks due to covid lockdowns in China and recessionary threats have pushed oil prices lower despite OPEC’s current 2 million bpd cut. Contango development in both WTI and Brent may also provide an incentive to move forward with additional cuts. Chart sourced from Bloomberg.
