Outlook: Energies are finding support this morning with nearby WTI back above $75. Overall, it’s a bullish narrative this week with demand optimism and the rising prospect of a soft landing with rising interest rates. The US has now backed away from offers to refill the SPR, citing high prices or unmet specifications. The Biden Administration has said they are targeting stability around $70 to move forward with the replenishment. China will continue to garner a lot of attention this week and next with its Lunar New Year holiday. Travel is expected to largely exceed year-ago levels which may be used as a benchmark for their transition away from covid restrictions. US economic data continues to reflect mixed sentiment following the recent rate hikes, raising the prospect of a softer-than-expected landing. US December inflation data will be reported on Thursday this week.
Crude
- The Biden administration is delayed the replenishment of the SPR after deciding the offers it received were too expensive or didn’t meet the required specifications.
- For the first time in three years, China reopened sea and land crossings with Hong Kong and ended a requirement for travelers to quarantine.
- China issued 111.8 million tons of crude imports for non-state owned refiners and traders.
- China has issued a combined 132 million tons of crude imports for 2023 compared to 109 million tons last year at this time (20% increase.)
- Global crude in floating storage declined by 5.9% w/w.
- The COT report showed crude managed money traders reduced their net long position by 29,923 to net long 165,486.
- As of 8.42 am CST: Brent crude oil up $1.85 to $80.42, US dollar index down $0.573 to 103.306 while the nearby e-mini S&P 500 futures contract is up 20.25 to 3936.00.
Diesel
- Kuwait expects to ship 50,000 bpd of diesel to Europe this year, up from 10,000 bpd last year.
- Chinese jet fuel demand is expected to increase to 0.6 mbpd this week ahead of the Lunar New Year. This would represent a 0.1 mbpd increase from last week with a similar increase expected the following week.
- India’s diesel consumption rose 6.5% y/y in December, according to Bloomberg.
- US jet fuel inventories fell to a 26.5-year low last week, per EIA data.
- The COT report showed ULSD managed money traders reduced net length by 2,065 to 18,082.
Gasoline
- India’s gasoline sales were up 3.1% y/y in December, according to Bloomberg.
- The COT report showed RBOB managed money traders net bought 886 contracts and are net long 51,785 contracts.
Propane
- Conway is trading at .7400 while Belvieu is trading at .7400.
- Conway is trading at 42% of crude.
- The US is exporting 74% of production as of 12/30/22.
Natural Gas
- Total US gas demand rose to 113.3 Bcf/d.
- Total US dry production fell to 97.2 Bcf/d.
- Overnight weather runs removed 8 HDDs through the two-week forecast.
- Baker Hughes reported natural gas rigs fell by 4 to 152.
Commitment of Traders Report: Managed money traders cut their bullish WTI bets by the most since October in the week ending Jan. 3. Net-bullish bets in WTI are at their lowest level since August.
