Outlook: The energy complex is mostly positive this morning with crude and gasoline higher while diesel trades near even. WTI most notably is testing $90 psychological resistance for the first time since November of 2022. The macro outlook has done very little to challenge the momentum in the energy complex and global supply concerns have overpowered many of the minor events. With the major oil agencies all predicting significant oil shortfalls to end the year, something significant on the bearish front will need to develop to pause the run. High interest rates will likely need to “break” something to stoke economic fears again or sanction relief with Iran or Venezuela could provide oil supplies to move towards balance. Last year SPR releases provided relief as prices broke above $100, but that card is likely off the table with inventories at decade lows.
Crude
- Chinese refiners announced plans to boost run rates to 42.65 million tons of crude in September which would be record levels, according to Bloomberg.
- Prompt WTI is testing $90 today, and trading at its highest levels since Nov22.
- Industry chatter of $100 oil is growing with momentum finding very little resistance
- The EIA reported US crude stocks rose by 3.9 million barrels last week.
- Crude broke a 5-week streak of draws with the larger than expected build for last week.
- US crude production rose 100,000 bpd to 12.9 mbpd.
- US CPI was reported at 3.7% y/y vs 3.6% est.
- The ECB raised interest rates by 25 bps to 4%, the highest level since the euro launched in 1999.
- The US dollar jumped back over 105 following the ECB interest rate announcement.
- As of 7:48 am CST: Brent crude oil up $1.32 to $93.20, US dollar index up $0.409 to 105.177 while the nearby e-mini S&P 500 futures contract is up 13.25 to 4482.00.
Diesel
- Chinese refiners intend to increase diesel production by 2.1% m/m in September.
- The EIA reported diesel stocks rose by 3.9 million barrels last week.
- US diesel demand fell by 7.4% w/w.
Gasoline
- Chinese refiners intend to decrease gasoline output by 4.6% m/m for September.
- The EIA reported gasoline stocks rose by 5.5 million barrels last week.
- US gasoline demand fell by 11% w/w.
Propane
- Conway is trading at .7550 while Belvieu is trading at .7675.
- Conway is trading at 37% of WTI.
- The US is exporting 65% of production as of 9/1/23.
- The EIA reported propane stocks rose by 3.1 million barrels last week.
Natural Gas
- Overnight weather runs were added 4 CDDs through the two-week forecast.
- The EIA is expected to report a 49 Bcf injection into storage for last week.
- The 5-year average injection is 76 Bcf.
Russian Diesel Exports: Russia’s diesel exports have faltered since peaking in early Summer. Diesel stocks in Asia remain well below 5-year average levels which has raised concern over global diesel supplies. Asia remains one of Russia’s key export destinations.
