Nymex markets will halt early on Monday at 1:30 CT in observance of Presidents Day. Our office will be staffed for the shortened session.
Outlook: Energies are working sharply lower today with crude threatening to break out of its recent trade range. Bearish pressures look poised to overwhelm the market today with reports of steady export flows out of Russia and OPEC+ looking less likely to increase production cuts. The prospect for an oil surplus in the first half of 2023 appears to be coming to fruition with the current market dynamics. Various banks and agencies project a tighter supply dynamic during the second half of the year largely driven by Chinese demand recovery. Chinese purchasing has shown signs of growth; however, they are still maintaining strong exports. Baker Hughes will report its rig count today at noon. While we don’t typically see this as a market mover, it can be used as a forecasting tool to see how the oil industry views stability and profitability on a longer-term basis. Oil rigs can take 9-12 months before they begin producing oil, so long-term security is essential for these rigs to come online.
Crude
- Russian oil producers expect to maintain current export levels, despite the government’s plan to cut oil output in March, according to the Vedomosti newspaper.
- Saudi Arabia’s energy minister said the current OPEC+ cut of 2 million bpd is locked in until the end of the year.
- Macroeconomic pressure and fear of additional rate hikes are weighing heavily on energies.
- Two Fed officials yesterday warned that borrowing cost hikes are essential for taming inflation.
- Chinese demand continues to show signs of growth, however, is being offset by demand concerns on a broader scale.
- $75 may act as psychological support if WTI continues to slide lower.
- Further downside into next week could show support around $72.50, where the US may purchase barrels for the SPR.
- Baker Hughes will report its rig count at 12:00 CT.
- As of 8:08 am CST: Brent crude oil down $2.36 to $82.77, US dollar index up $0.504 to 104.360 while the nearby e-mini S&P 500 futures contract is down 20.25 to 4079.00.
Diesel
- Warmer weather revisions for the east coast are providing headwinds for diesel.
- Russia continues to lean heavily on China and India for crude and refined exports.
- The prompt diesel crack has dipped below $40 for the first time since April.
Gasoline
- Activity in the top 15 largest cities in China has risen to its highest level since June 2021, according to Bloomberg data.
- AAA reports the national average gas price at $3.421, down a penny from a week ago.
Propane
- Conway is trading at .7900 while Belvieu is trading at .8250.
- Conway is trading at 43% of crude.
- The US is exporting 78% of production as of 2/10/23.
Natural Gas
- US natural gas demand rose to 113.2 Bcf/d yesterday.
- Overnight weather runs removed 14 HDDs through the two-week forecast.
- The EIA reported a 100 Bcf withdrawal from storage for last week.
- The 5-year average draw is 166 Bcf.
Continuous Daily RBOB: The prompt gasoline and WTI contract have traded below their 50-day moving average today. A close below this level could indicate further downside into next week. The gasoline cracks have remained more resilient than diesel however are taking a hit today, moving below its recent trade range around $25.
