Outlook: Markets are mixed to start today’s session with WTI trading higher while products move lower. Energies were higher across the board early this morning however a higher-than-expected nonfarm payrolls report backed the market off its highs. The EU tentatively agreed on a price cap level of $60 and if finalized will go into effect on Monday. Adjustments will be made to the cap as necessary to assure its effectiveness by keeping it below market values. The market will watch closely over the next few weeks to see if Russia will completely cut off flows to countries participating in the cap. OPEC+ is scheduled to meet on Sunday and is expected to maintain its current production cut. Any surprises that come from the meeting could have an exaggerated effect on the market due to the announcement coming during the thinly traded Sunday night session. Because the meeting is being held virtually, many anticipate they will roll over until their next scheduled meeting.
Crude
- The EU governments tentatively agreed on a $60 price cap on Russian seaborne oil with an adjustment mechanism to keep the cap at 5% below market price.
- Russian Urals are currently trading around $70.
- Two major Russian producers said Russian output could fall by 500,000 to 1 million bpd by early 2023 due to the EU’s ban on seaborne imports.
- OPEC+ is expected to stick with its current production target cut of 2 million bpd when it meets on Sunday.
- OPEC’s production fell by around 1 million bpd last month according to Bloomberg data.
- The Biden administration is looking to stop sales from the SPR to prep for refilling the reserve.
- Baker Hughes will report its rig count at 12:00 CT.
- US nonfarm payrolls were reported at 263,000 vs 200,000 est.
- As of 9:03 am CST: Brent crude oil up $0.62 to $87.50, US dollar index up $0.406 to 105.134 while the nearby e-mini S&P 500 futures contract is down 45.25 to 4036.00.
Diesel
- Diesel stocks are 11.2 million barrels below last year’s levels and 16.2 million barrels below the 5-year average.
- AAA reports the national average retail diesel price at $5.132
Gasoline
- This week ARA gasoline stocks reached a 3-month high.
- The prompt gasoline spread flipped into contango yesterday.
- AAA reports the national average retail gas price at $3.448.
Propane
- Conway is trading at .7500 while Belvieu is trading at .7450.
- Conway is trading at 41% of crude.
- The US is exporting 62% of production as of 11/25/22.
Natural Gas
- Total US gas demand rose to 120.1 Bcf/d.
- Total US dry production fell to 97.3 Bcf/d.
- Overnight weather runs removed 13 HDDs through the two-week forecast.
- The EIA reported an 81 Bcf draw from storage last week.
- The 5-year average draw is 34 Bcf.
- Yesterday, the US senate passed legislation forcing a tentative rail labor agreement.
Prompt RBOB Spread: The prompt RBOB spread has flipped into contango following the expiration of the December contract. The carry is maintained throughout the curve through May providing profitability for storing product into spring.
