Outlook: Energies are moving higher across the board today with WTI pushing through $75. China’s ambassador to the US said they will continue to relax covid restrictions and hopes to welcome more international travelers in the near future. Conversely, China canceled a key economic policy meeting due to continued outbreaks in Beijing. OPEC lowered their final demand forecast for 2022, citing Chinese demand loss due to ongoing covid restrictions. The macros also provided a boost this morning with CPI data coming in below estimates. The US dollar is down over 1,300 ticks providing strength for both equities and commodities. The Fed will meet tomorrow to announce the next interest rate hike and the trade is expecting an increase of 50 bps.
Crude
- OPEC trimmed their absolute 2022 oil demand forecast by 140,000 bpd, citing slowing activity in OECD and China.
- China has delayed the Central Economic Work Conference due to surging covid infections in Beijing.
- Caspian CPC Blend crude exports are set to drop to 1.51 mbpd in January per Bloomberg.
- There remains no timetable for the resumption of flows on the Keystone pipeline.
- Goldman Sachs and BoA said on Monday that a successful economic reopening in China could further boost oil prices above $90.
- BNEF estimates capital expenditure in the oil sector will fall 10% short of 2019 levels this year.
- The SPR fell by 4.7 million barrels last week. YTD releases now total 211.4 million barrels, with 12.3 million barrels left to be released prior to year-end.
- US oil output from top shale regions is set to rise by 94,500 bpd to 9.32 mbpd in January, per the EIA.
- WTI in the Gulf traded at a discount to Nymex oil futures for the first time since October 2021.
- Reuters estimates crude stocks fell by 3.9 million barrels last week.
- The API will report their inventory survey at 3:30 CT.
- November CPI rose 7.1% vs 7.3% est. and down from 7.7% in October.
- As of 8:21 am CST: Brent crude oil up $1.90 to $79.89, US dollar index up $1.331 to 103.800 while the nearby e-mini S&P 500 futures contract is up 127.25 to 4119.00.
Diesel
- Reuters estimates diesel stocks rose by 2.3 million barrels last week.
- China’s unwinding of covid restrictions has allowed domestic air travel to rise to around 65% of pre-pandemic demand.
Gasoline
- Reuters estimates gasoline stocks rose by 2.5 million barrels last week.
- Bloomberg road congestion in China is starting to grow again which could reduce their gasoline exports.
Propane
- Conway is trading at .7100 while Belvieu is trading at .7000.
- Conway is trading at 41% of crude.
- The US is exporting 60% of production as of 12/2/22.
Natural Gas
- Total US gas demand rose to 114.8 Bcf/d.
- Total US dry production rose to 98.1 Bcf/d.
- Overnight weather runs added 7 HDDs through the two-week forecast.
- Yesterday, Freeport LNG filed a report with FERC detailing restart plans without suggesting a restart date.
- Reuters estimates natural gas inventories fell between 36-46 Bcf last week.
Long-term Oil Demand: To escape some of the near-term chaos in energy, it's worth a refresher on where long-term oil demand is projected. Various scenarios anticipate oil demand surpassing or matching 2019 levels by 2030. OPEC projects the most aggressive track estimating oil demand to reach 102 mbpd and a 5% increase over 2019 levels by 2030. Lack of investment has constricted the ability to add production capacity and may be the catalyst to how prices react during this growth period.
