Outlook: The market is taking a softer tone for the third consecutive day with energies trading lower across the board. China’s covid situation has grabbed the attention of other countries with several now requiring a negative covid test for any travelers coming from China. While official death counts remain low, hospitals and funeral homes have become overwhelmed showing conflicting results. The market may be seeing this uncertainty and electing to take profits ahead of the New Year. Fundamental data will be released by the EIA this morning. Crude inventories are expected to decline, while products have mixed projections. This week’s report could show some of the effects of the winter storm that moved through a large portion of the country last weekend which impacted travel and heating demand.
Crude
- The United States will require a covid test for travelers coming from China. India, Italy, Japan, and Taiwan have said they will require the same procedure.
- Bloomberg estimates Russia will be able to sell oil at near market rates to Asian customers, despite the price cap.
- Year-end profit-taking may be a significant driver for the pullback this week.
- The US SPR fell by 3.5 million barrels last week to 375.1 million barrels.
- Reuters estimates crude stocks fell by 1.5 million barrels last week.
- An industry group survey yesterday afternoon showed crude inventories fell by 1.3 million barrels last week.
- The EIA will report inventories at 10:00 CT.
- As of 8:01 am CST: Brent crude oil down $0.71 to $82.55, US dollar index down $0.457 to 104.006 while the nearby e-mini S&P 500 futures contract is up 29.25 to 3836.00.
Diesel
- Reuters estimates diesel stocks fell by 2.1 million barrels last week.
- An industry group survey yesterday showed diesel inventories rose by 390,000 barrels last week.
Gasoline
- Reuters estimates gasoline inventories rose by 500,000 barrels last week.
- An industry group survey yesterday showed gasoline stocks rose by 510,000 barrels last week.
Propane
- Conway is trading at .7625 while Belvieu is trading at .7050.
- Conway is trading at 40% of crude.
- The US is exporting 57% of production as of 12/9/22.
- OPIS estimates propane stocks fell by 2.77 million barrels last week.
Natural Gas
- Total US gas demand fell to 114.2 Bcf/d.
- Total US dry production fell to 86.0 Bcf/d.
- Overnight weather runs removed 16 HDDs through the two-week forecast.
- The EIA is expected to report a 196 Bcf withdrawal from storage for last week.
- The five-year average withdrawal for this week is 108 Bcf.
Continuous Daily NG: The continuous natural gas contract has pushed to its lowest level since March 2022. Warmer weather revisions in the deferred forecast have put significant pressure on the market. If the projected withdrawal of 196 Bcf is realized today, stocks would be 16 Bcf below last year’s levels.
