Outlook: Crude and products are finding a nice boost this morning while natural gas trades lower. Reports that Russia may cut oil production by 500,000 – 700,000 bpd in 2023 is providing early support. Additionally, Russian exports through the Baltic are estimated to have dropped by 20% already this month. Natural gas has pushed lower after a quiet start to the morning after Freeport LNG reported another delay for resumption of service. The export hub now plans to restart services by the second half of January. Thin trade is evident today and trade volumes will likely dwindle quickly ahead of the long holiday weekend.
Crude
- Russia may cut oil output by 5-7% in early 2023 as it responds to price caps, according to the RIA news agency citing Prime Minister Alexander Novak.
- Russian crude exports through the Baltic are expected to decline by 20% this month according to a Reuters report.
- On Tuesday, Germany reiterated plans to cease all Russian crude purchases throughout 2023.
- Shanghai medium sour crude inventories rose by 33% versus week-ago figures.
- Baker Hughes reported US oil rigs were up 2 last week to 622.
- US third quarter GDP came in higher than expected at 3.2% vs 2.9% est.
- As of 8:23 am CST: Brent crude oil up $1.97 to $82.95, US dollar index down $0.039 to 104.394 while the nearby e-mini S&P 500 futures contract is down 7.25 to 3842.00.
Diesel
- Over 4,400 US flights have been cancelled due to the winter storm in the Midwest.
- An uptick in heating demand will act to offset the decrease in travel demand from the current winter storm.
Gasoline
- AAA reports the national average gas price at $3.096.
- Bloomberg analysis suggests Chinese traffic levels in 15 cities declined by 48% w/w.
Propane
- Conway is trading at .7400 while Belvieu is trading at .7075.
- Conway is trading at 40% of crude.
- The US is exporting 57% of production as of 12/9/22.
- An uptick in demand should support propane prices short term, however warmer weather revisions have build up in the extended forecast.
Natural Gas
- Total US gas demand fell to 135.5 Bcf/d.
- Total US dry production fell to 96.1 Bcf/d.
- Overnight weather runs decreased 16 HDDs through the two-week forecast.
- The EIA reported a 87 Bcf draw for last week.
- The 5-year average withdrawal is 124 Bcf.
- Freeport LNG now anticipates a restart during the second half of January as opposed to year-end.
WTI Prompt Spread: The WTI forward curve has begun to steepen again following the expiration of the January contract. The prompt spread has climbed back above 10 cents after trading at -34 cents earlier this month. A stronger inverse suggests greater demand for nearby product and a tighter marketplace.
