Outlook: The energy complex is weaker to start the day as the weekly rally appears to have run out of steam. Headlines are relatively quiet today but we did see another round of mixed market drivers out of China. China’s economy showed further signs of slowing last month while their oil processing rates hit 12-month highs. Increased export quotas have been a key oil demand driver for China as covid restrictions have dampened their domestic demand. Mobility data suggests activity is climbing with a busy travel season anticipated in January. The Keystone pipeline has been partially restarted today with full resumption of flows expected by December 20th. Canadian crude prices were relatively unaffected by the disruption due to ample spare storage capacity.
Crude
- China’s industrial output growth and retail sales slowed more than expected last month.
- China’s oil processing rates hit their highest level in 12 months after refiners ramped up to meet export quotas.
- TC Energy has resumed partial operation on the Keystone pipeline.
- US crude production fell 100,000 bpd to 12.1 mbpd.
- The EIA reported a 10.2 million barrel build in crude stocks last week.
- This build in crude last week was the largest build in 20 months.
- The Federal Reserve increased interest rates by 50 bps yesterday.
- As of 8:29 am CST: Brent crude oil down $0.67 to $82.03, US dollar index down $0.138 to 103.632 while the nearby e-mini S&P 500 futures contract is down 49.25 to 3951.00.
Diesel
- The EIA reported a 1.3 million barrel build in diesel stocks last week.
- Average total distillate demand for the past four weeks was down 13.21% compared to last year.
Gasoline
- The EIA reported a 4.5 million barrel build in gasoline stocks last week.
- Average total gasoline demand over the past four weeks is down 9% compared to last year.
- Chinese traffic congestion has continued to rise according to Bloomberg data.
Propane
- Conway is trading at .7375 while Belvieu is trading at .7100.
- Conway is trading at 40% of crude.
- The US is exporting 58% of production as of 12/9/22.
- The EIA reported propane inventories rose 700,000 barrels last week.
Natural Gas
- Total US gas demand rose to 120.6 Bcf/d.
- Total US dry production fell to 96.5 Bcf/d.
- Overnight weather runs added 4 HDDs through the two-week forecast.
- The EIA is expected to report a 53 Bcf withdrawal for last week.
- The 5-year average withdrawal for this time period is 93 Bcf.
Prompt WTI Spread: The front-month WTI spread remains in contango but has strengthened off its lows. Near-term concerns of oversupply have been temporarily reduced with the Keystone pipeline disruption and the prospect of rising Chinese demand.
