Outlook: The energy complex has erased early losses with crude and products all in positive territory. Diesel is the headline this morning as observes gains nearing 10 cents. Ongoing discussions to reduce domestic fuel prices in Russia have led to an export ban of gas and diesel starting today. The global diesel market is tight, specifically at major supply hubs, and this ban will likely provide additional pressure. Refinery turnaround season in the US is underway with a small decline in refinery utilization last week, but operating levels still remain 4% above 5-year average levels amidst favorable crack spreads. Expect diesel inventories to remain a focus as we approach heating season. On the macro front, the BoE surprised the market today leaving interest rates unchanged. The US dollar is pressing to fresh highs this morning and is closing the gap to return to its highest level since November of 2022. A higher dollar makes it more expensive for non-dollar currency holders to purchase dollar-based commodities.
Crude
- With the expiration of the October crude contract a small roll gap was developed but quickly filled this morning.
- The prompt WTI backwardation is expanding to fresh highs this morning.
- The BoE left interest rates unchanged at 5.25% vs estimates for a hike to 5.5%.
- The Fed left interest rates unchanged at their meeting yesterday but also reinforced a more hawkish stance with another rate increase expected this year.
- The US dollar is trading at its highest level since March.
- US crude stocks fell by 2.1 million barrels last week.
- US crude stocks are 47
- As of 7:51 am CST: Brent crude oil up $0.06 to $93.58, US dollar index up $0.514 to 105.671 while the nearby e-mini S&P 500 futures contract is down 40.25 to 4406.00.
Diesel
- Russia is imposing a full ban on gasoline and diesel exports starting today.
- The EIA reported diesel stocks fell by 2.8 million barrels last week.
- US diesel demand rose by 16% w/w to 4.1 mbpd.
Gasoline
- The EIA reported US gasoline stocks fell by 831,000 barrels last week.
- US gasoline demand rose 1.2% w/w to 8.4 mbpd.
Propane
- Conway is trading at .6987 while Belvieu is trading at .7037.
- Conway is trading at 34% of WTI.
- The US is exporting 47% of production as of 9/15/23.
Natural Gas
- Overnight weather added 1 TDD through the two-week forecast.
- The EIA is expected to report a 65 Bcf injection into storage for last week.
- Current storage surplus is 203 Bcf.
Continuous Daily Diesel: With the announcement of Russia banning diesel and gas exports today, diesel is starting the day strong. While Russia doesn’t ship diesel directly to the US, global supply concerns will impact all major consumers.
