Outlook: Energies have turned weaker again, extending the losses observed during Friday’s session. Reports of drone strikes across Iran provided some headline volatility Sunday night, however, it was clearly expressed that no oil production facilities were involved. Further escalations could pose a risk to crude infrastructure. This week has a large slate of market drivers with the US, ECB, and BOE all expected to increase interest rates, an OPEC+ panel meeting on Wednesday, and EIA inventory data. The US Federal Reserve is expected to increase rates by 25 bps while the ECB and BoE are expected to increase rates by 50 bps. Two delegates have said it's unlikely any adjustments will be made to OPEC+ current production cuts during the panel meeting on Wednesday. Risk-off appears to be the sentiment today ahead of a busy week.
Crude
- More than 300 million trips were made over the Chinese Lunar New Year Holiday, which measures to about 90% of pre-pandemic demand according to the Ministry of Culture and Tourism.
- China has indicated they will increase their refinery run rates by 1-2% next month.
- Saudi Aramco may reduce its official oil selling price by 20 cents for March sales to Asia, according to Bloomberg.
- The Wall Street Journal reported several drone strikes across North-Western Iran this weekend, but none were reported at Iranian crude production facilities.
- Global crude in floating storage declined by 16% week/week.
- According to two delegates, the JMMC panel is unlikely to recommend changes to OPEC+ oil policy.
- Cold weather could threaten Texas oil and gas producers this week.
- The COT report showed managed money traders added 6,422 contracts and are now net long 188,474.
- Baker Hughes reported oil rigs fell by 4 last week.
- As of 8.36 am CST: Brent crude oil down $1.39 to $85.27, US dollar index up $0.026 to 101.953 while the nearby e-mini S&P 500 futures contract is down 25.25 to 4058.00.
Diesel
- Russia is expecting fuel exports to hit a 3-year high in February despite the EU’s import ban.
- The COT report showed managed money traders added 8,499 contracts and are now net long 26,126 contracts.
- The prompt diesel contract is testing support at its 50-day moving average near $3.22.
- Tuesday is the last trade day for February ULSD.
- The COT report showed managed money traders added 10,553 contracts and are now net long 67,091 contracts.
- Chinese retail gasoline sales were up 20% from last year, according to the Ministry of Culture and Tourism.
- Tuesday is the last trade day for February RBOB.
Propane
- Conway is trading at .9250 while Belvieu is trading at .9350.
- Conway is trading at 48% of crude.
- The US is exporting 68% of production as of 1/13/22.
Natural Gas
- US natural gas demand fell to 121.3 Bcf/d yesterday.
- US dry production rose to 97.8 Bcf/d yesterday.
- Overnight weather runs removed 20 HDDs through the two-week forecast.
- Baker Hughes reported gas rigs rose by 4 last week.
Daily Continuous ULSD: The prompt diesel contract is falling again today and testing support on its 50-day moving average (Blue Line). Weakness in crude and products is being supported by Chinese demand coming in below 2019 levels and the flow of Russian products. $3 may act as psychological support if the downtrend continues.
