Outlook: Energies are mostly positive with continuous WTI pushing to fresh yearly highs and November crude setting contract highs. Gas and diesel are on opposite sides this morning with diesel down a penny and gas up a penny. There continues to be very little resistance to the global economic tightening of crude and refined product stocks which has allowed this long bullish trend to extend its run. Economies have remained resilient to higher interest rates and demand destruction has been limited. A swath of interest rate decisions are due this week which includes the US Fed, BOE, and Peoples Bank of China. A rate cut from the PBoC this week could be the next stimulus effort which has been supportive for energy prices. Refined products, however, may see a limited move due to an increase in exports from Chinese refiners.
Crude
- Citigroup says the oil rally will need to find relief from producers outside OPEC+ and expects non-OPEC countries to add 1.8 mbpd this year and 1 mbpd next year.
- Saudi Arabia’s crude exports fell to 6.01 mbpd in July, 11.6% below June levels, according to Reuters.
- WTI is setting fresh yearly highs this morning as it advances past $90.
- Baker Hughes reported US oil rig counts rose by 2 last week to 515.
- Last week’s COT report showed managed money traders increased their net length for the 3rd consecutive week in crude, adding 54,000 contracts.
- October WTI will expire 9/20 and there is around 85 cents of backwardation to the November contract.
- The FOMC will announce its interest rate decision on Wednesday. Expectations are for rates to remain unchanged.
- As of 7:53 am CST: Brent crude oil up $0.81 to $94.73, US dollar index up $0.005 to 105.327 while the nearby e-mini S&P 500 futures contract is down 5.25 to 4493.00.
Diesel
- The Russian government is considering a ban on oil product exports in order to stabilize domestic prices.
- Last week’s COT report showed HO managed money traders net sold 2,147 contracts and are net long 34,670 contracts.
Gasoline
- Chinese gasoline exports rose to their highest level this year, rising 13% m/m in August to 372,000 bpd.
- Last week’s COT report showed RBOB managed money traders added 6,746 contracts and are net long 70,877 contracts.
Propane
- Conway is trading at .7675 while Belvieu is trading at .7737.
- Conway is trading at 37% of WTI.
- The US is exporting 65% of production as of 9/8/23.
Natural Gas
- Overnight weather runs were unchanged through the two-week forecast.
- Baker Hughes reported nat gas rigs rose by 8 to 121 last week.
- Freeport LNG has resumed normal operation after outages last week.
- European storage is 94.4% full, 10% above normal levels for this time period.
Refined Products: Refinery output has continued to trail demand which has accelerated prices relative to crude. Saudi Arabia and Russia also provide crude grades that are favorable for diesel production, and both notably have cut production this year. Inflationary pressure from elevated fuel prices is a risk through the end of the year.
