Outlook: Yesterday’s selloff doesn’t appear out of steam yet with crude and diesel moving lower again today. The complex has tipped oversold but technical considerations aren’t top of mind for traders at the moment. Macro concerns appear to be the driver here, specifically as it relates to energy demand. A historically bad gasoline demand print last week has reignited demand destruction fears, spilling over to diesel and crude. The headlines of a strong refinery turnaround season have largely been discounted for the time being, even with refinery rates already showing retreat last week. Demand fears could expand to full blown recessionary fears if the economic reports begin to turn in the wrong direction and that downside risk is worth keeping in mind. Nonfarm payroll data will be reported tomorrow morning which can often influence the trade.
Crude
- OPEC+ JMMC recommended no change to current output cuts.
- Russia and Saudi Arabia will continue voluntary cuts through the end of the year.
- The Keystone crude pipeline is operating at half capacity (300kbpd) following maintenance on Tuesday. Canadian crude’s discount to WTI fell to its lowest levels since February.
- WTI closed below its lower Bollinger Band yesterday.
- WTI closed below its 50-day moving average yesterday of $84.94
- The EIA reported crude stocks fell by 2.2 million barrels last week.
- Crude stocks at Cushing rose for the first time in 8 weeks by 132,000 barrels.
- As of 8:18 am CST: Brent crude oil down $1.18 to $84.63, US dollar index down $0.146 to 106.653 while the nearby e-mini S&P 500 futures contract is down 13.25 to 4284.00.
Diesel
- The EIA reported diesel stocks fell by 1.2 million barrels last week.
- Diesel stocks are 17.3 million barrels below 5-year average levels.
- Diesel closed well below its 50-day moving average yesterday. The 200-day and 100-day moving averages are consolidated around $2.82 for next support.
Gasoline
- The EIA reported gasoline stocks rose by 6.4 million barrels last week.
- Gasoline stocks have rebounded to 2.4 million barrels above 5-year average levels.
- 4-week implied gasoline demand fell to a 25 year low last week.
Propane
- Conway is trading at .6800 while Belvieu is trading at .6950.
- Conway is trading at 33% of WTI.
- The US is exporting 75% of production as of 9/29/23.
- The EIA reported a surprise draw of 25,000 barrels for propane last week.
Natural Gas
- Weekend weather runs added 9 HDDs through the two-week forecast.
- US LNG exports hit a record high of 11.6 Bcf/d in the first half of 2023
- The EIA is expected to report a 91 Bcf injection for last week.
Continuous Daily HO: Diesel closed below its 50-day moving average while tipping into oversold territory. The 100 & 200 day moving averages have quickly become a fresh downside target.
