Outlook: The crude market is taking the lead this morning while refined products falter. Crude found direction early this morning with the release of OPEC’s monthly report. The key data point of this report was a larger than expected supply deficit anticipated for Q4 of this year. OPEC expects the global supply deficit to increase to 3.3 mbpd which is higher than most industry estimates which fall in the 2-2.5 mbpd range. The US and Iran are conducting a prisoner swap and relations between the two continue to improve. US officials have already confirmed that oil sanctions against Iran have been loosened and the improving relationship could lead to an official Iran deal down the road. Iran’s crude exports have increased sharply this year, primarily shipping to China, which may dilute volatility if a deal is struck. Natural gas is moving higher today with colder weather revisions populating in the back end of the forecast. Worth keeping an eye on news from Freeport LNG, which reduced feedgas intake to just 28% over the weekend. No official statement has been made but a prolonged development could be a bearish driver if feedgas is shut in.
- OPEC released its monthly report this morning which showed expectations for a 3.3 million bpd supply deficit for Q4.
- OPEC’s 13 members increased oil output by 113,000 bpd to 27.45 mbpd in August.
- OPEC left its 2023 and 2024 global oil demand forecast unchanged.
- Libya’s primary oil ports resumed flows today after being shut in due to extreme weather.
- The EIA will release its Short Term Energy Outlook today around noon.
- Completion of Chevron’s 260,000 bpd Kazakh oil refinery expansion has been pushed back 6 months to the end of 2024
- The US SPR rose by 300,000 barrels last week to 350.6 million barrels.
- Reuters estimates crude stocks fell by 2 million barrels last week.
- The API will release its inventory survey at 3:30 CT.
- As of 7:47 am CST: Brent crude oil up $0.87 to $91.51, US dollar index up $0.268 to 104.840 while the nearby e-mini S&P 500 futures contract is down 9.25 to 4480.00.
- Diesel closed at a multi-month high of $3.3622 yesterday.
- The diesel prompt spread rose to its highest level since March at 10 cents yesterday.
- India’s road transport minister plans to propose an additional 10% tax on diesel vehicles to cut fuel emissions and pollution.
- Reuters estimates diesel stocks rose by 1.4 million barrels last week.
- Reuters estimates gasoline stocks fell by 200,000 barrels last week.
- US gasoline imports from Europe fell to their lowest level since July at 243,000 bpd last week.
- Conway is trading at .7625 while Belvieu is trading at .7700.
- Conway is trading at 37% of WTI.
- The US is exporting 63% of production as of 9/1/23.
- Overnight weather runs added 5 CDDs through the two-week forecast.
- Yesterday, natural gas demand fell to 101.9 Bcf/d.
- The US exported more LNG than any other country in the first half of 2023, according to the EIA. Exports averaged 11.6 bcf/d.
- LNG feedgas flows to Freeport remain below normal levels for the third consecutive day. No official statement has been made from Freeport as to why volumes dropped.
Chicago Diesel Basis: Basis levels in the Chicago region have fallen sharply over the last week. We recommend filling storage if discounts are reflected at the local level and hedging the inventory length by selling futures. This will leave you long basis to take advantage of any normalization.