Outlook: Energies are mixed today with crude and diesel trading lower while gasoline moves higher. Chatter in the marketplace heavily revolves around China today who unexpectedly cut interest rates again. The cut came after another round of disappointing economic data. Stimulus efforts are likely to continue as the country looks to prevent further deflationary moves. From the oil perspective, China’s situation doesn’t look as bad on paper with throughput levels increasing while crude stocks fall. The trade is showing more concern with faltering economic data than any of the bullish fundamentals at this point. On the US side, the FOMC minutes will be released tomorrow which could give further insight as to what the Fed is thinking for the rest of the year. A dovish path could provide additional support for demand as it relates to energies.
Crude
- China’s refinery throughput rose to a 3-month high in July at 14.93 mbpd.
- The People’s Bank of China unexpectedly cut its rate on 1-year loans by 15 bps following a faltering retail sales report.
- Russia increased its export duty to the highest level this year at $21.40/ton for September, which pushes the price of Urals above the G7 price cap.
- The EIA expects US shale oil production to fall by 20,000 bpd in September to 9.42 mbpd.
- Reuters estimates crude stocks fell by 2.1 million barrels last week.
- The US SPR rose by 600,000 barrels last week.
- US retail sales rose more than expected at 0.7% vs 0.4% est.
- The FOMC minutes from the July meeting will be released tomorrow.
- As of 8:20 am CST: Brent crude oil down $0.59 to $85.62, US dollar index down $0.327 to 102.863 while the nearby e-mini S&P 500 futures contract is down 18.25 to 4487.00.
Diesel
- Two new tropical disturbances have developed in the Atlantic over the weekend.
- US diesel exports to Brazil have more than doubled at 66kbpd this month due to a decline in Russian diesel exports.
- Reuters estimates diesel stocks fell by 400,000 barrels last week.
Gasoline
- US gasoline imports from Europe rose to 387kbpd last week vs 270kbpd the week prior.
- Goldman Sachs forecast retail gas prices to average $3.60 through 2024.
- Reuters estimates gasoline stocks fell by 1.6 million barrels last week.
Propane
- Conway is trading at .6600 while Belvieu is trading at .6750.
- Conway is trading at 35% of crude.
- The US is exporting 67% of production as of 8/4/23.
Natural Gas
- Overnight weather runs were unchanged for the two-week forecast.
- Yesterday, US natural gas demand fell to 102.6 Bcf/d.
- The EIA’s DPR forecast US gas production will decrease by 147 mmcf/d in August and September.
Continuous Daily HO: The diesel market closed below its 9-day moving average yesterday which can be a short-term bearish indicator. A move towards $3.00 may be likely this week if the FOMC minutes carry hawkish rhetoric tomorrow. So far, demand destruction under economic tightening has been less than expected.
