Outlook: Energies are looking for direction to start the morning with crude edging higher while products lag behind. A lack a fresh market drivers has allowed the complex to move sideways this week. Chinese demand growth has been a quiet bullish driver and has worked to prevent bearish headlines from breaking through support. Fundamentals also brought on bearish pressure but the record adjustment that supported the headline crude build has left traders weary. Reports that major oil producers have begun placing hedges to protect downside moves can be seen as an indication of increasing stability in the energy complex. Extreme volatility had previously flushed many traders out of the market over the last year, but open interest has since seen a nice rebound. Macros will remain a key market driver moving forward with inflation looking increasingly fragile with economic reports showing mixed signals.
Crude
- Major oil producers, including Hess Corp. and Petroliam Nasional Bhd, have locked in hedges to protect against falling prices.
- There has been a rise in shipping practices use to move Russian crude and oil products that are aimed to deceive observers, according to maritime consultancy Windward Ltd.
- Markets may find macro influence from a host of Fed speeches today.
- Chinese air passenger traffic has returned to 70% of full strength, according to Bloomberg.
- Rhine river water levels have dipped again to levels that require tankers to carry half capacity, according to Riverlake.
- The EIA’s adjustment number swung by the most on record this week. The figure is used to make up the difference between reported stocks and those implied by production, refinery demand, and imports.
- US net imports fell by 1.07 million barrels last week.
- The EIA reported a 16.2 million barrel build in crude stocks for last week.
- As of 8:35 am CST: Brent crude oil up $0.08 to $85.43, US dollar index up $0.152 to 104.076 while the nearby e-mini S&P 500 futures contract is down 57.25 to 4100.00.
Diesel
- The EIA reported a 1.2 million barrel draw in diesel stocks for last week.
- US diesel demand rose by 3.5% w/w.
- At least two Russian diesel cargoes are heading for Saudi Arabia in an unusual sale likely driven by recent sanctions. The ME is a major diesel exporter to Europe.
Gasoline
- The EIA reported a 2.3 million barrel build in gasoline stocks for last week.
- US gasoline demand fell by 1.8% w/w.
- Road traffic in China increased 29% w/w according to BloombergNEF.
Propane
- Conway is trading at .7900 while Belvieu is trading at .8275.
- Conway is trading at 42% of crude.
- The US is exporting 78% of production as of 2/10/23.
- The EIA reported a 2.5 million barrel draw in propane stocks for last week.
- Propane exports rose to a single-week record of 1.85 mbpd.
Natural Gas
- US natural gas demand fell to 105.6 Bcf/d yesterday.
- Overnight weather runs added 11 HDDs through the two-week forecast.
- The EIA is expected to report a 109 Bcf draw.
Continuous Daily WTI: The prompt crude contract has developed a trading range between its 50 & 100-day moving averages which fall roughly between $77.25 and $81.00. A lack of fresh bullish headlines this week has really dampened the upside momentum from last week. The bearish headlines that have developed haven’t yet been significant enough to break through support on the 50-day MA, which it has tested the last two sessions.
