Outlook: The energy complex is finding strength again today. What appeared to be a relatively bearish EIA report yesterday was largely shrugged off. The 18.9 million barrel build in crude was the third largest on record, funded by the winter storm and a significant drop in exports. The market is focused on global demand, specifically around China. An uptick in Chinese purchasing suggests that demand is recovering despite the ongoing covid outbreak. It’s worth noting that China has not released any covid data this week but the market seems to be aware that case numbers are likely higher than reported. Energy is also finding a boost from outside markets today, with December inflation data coming in right in line with estimates. The healthy decline in inflation increases the hope for a Fed pivot towards a more dovish path and a better possibility of a soft landing.
Crude
- China hasn’t reported covid data in three days according to Bloomberg.
- Nigeria sees its oil production reaching 2.2 mbpd by year-end, according to the state-owned energy company.
- The oil branches of the CGT union are planning to strike at oil facilities in the coming weeks. The scheduled strike on Feb. 6 could result in the shutdown of refining facilities.
- Open interest in the oil complex has climbed to its highest level since October.
- US refinery rates recovered to 84.1% last week while rates were at 92% before the winter storm.
- US net imports rose by 2.71 million bpd with a 49% decline in exports.
- The EIA reported crude stocks rose by 18.9 million barrels last week.
- US crude inventories now sit 1.792 million barrels above the 5-year average.
- US December CPI rose 6.5%, down from a 7.1% increase in November.
- As of 7.48 am CST: Brent crude oil up $1.35 to $84.02, US dollar index down $0.503 to 102.685 while the nearby e-mini S&P 500 futures contract is up 0.25 to 3990.00.
Diesel
- The EIA reported diesel stocks fell by 1.06 million barrels last week.
- Diesel demand increased by 36.5% last week.
- Average four-week diesel demand remains 5.4% below year-ago levels.
- US jet fuel stocks are at their lowest level since 1996.
Gasoline
- The EIA reported gasoline stocks rose by 4.1 million barrels last week.
- Gasoline demand increased by 0.6% last week.
- Average four-week gasoline demand remains 4.8% below year-ago levels.
- The Nymex gasoline crack climbed to its strongest level since early November on Wednesday.
Propane
- Conway is trading at .7925 while Belvieu is trading at .8000.
- Conway is trading at 43% of crude.
- The US is exporting 69% of production as of 1/6/22.
- The EIA reported a 2.1 million barrel draw in propane stocks last week.
- Midwest inventories fell 1.1 million barrels.
Natural Gas
- Total US gas demand fell to 109.7 Bcf/d.
- Total US dry production fell to 97.4 Bcf/d.
- Overnight weather runs added 2 HDDs through the two-week forecast.
- The EIA is expected to report a 12 Bcf withdrawal for last week.
Russian Price Cap: The now-enforced Russian oil price cap is showing positive signs of working as intended. Crude shipments out of two major Russian ports averaged under $40 a barrel in the first part of January, according to Argus Media data. That’s down over 35% from November and 50% from June. Comparatively, Brent crude fell 15% and 37% respectively.
