Outlook: Energies are trying to find their footing for the last trading session of the week. Oversold technical indications have been screaming since Wednesday and it may be catching up today. Demand destruction fears have been the catalyst this week and the market is looking to find balance with the fresh outlook. With crude falling around 9% this week, it seems unlikely that Saudi Arabia or Russia will lift their voluntary cuts unexpectedly before the end of the year. It’s worth considering if prices continue to tumble, OPEC+ may entertain further cuts to support prices. If macro pressures continue to mount, sub-$80 crude seems like a likely landing point. Today’s nonfarm payroll data showed that the labor market remains resilient despite elevated interest rates. The fed fund futures are pricing in a 68% chance of rates remaining unchanged for the November 1st meeting, but the remaining percentage is betting on a hike of 25 bps.
Crude
- The Keystone pipeline has returned to near-normal operation following maintenance early this week. The pipeline has a capacity of ~600kbpd and moves crude from Alberta to the US.
- Chinese travel data for its holiday week is up 71% from last year and 4.1% from 2019 levels.
- Crude prices have fallen around $8 this week.
- Crude spreads have come in sharply with the front end of the curve selling off this week.
- Nonfarm payrolls were reported at 336k vs 170k.
- A strong labor market reinforces the higher-for-longer interest rate outlook.
- Baker Hughes will report rig counts at 12:00 CT.
- As of 8:46 am CST: Brent crude oil up $0.35 to $84.44, US dollar index up $0.394 to 106.726 while the nearby e-mini S&P 500 futures contract is down 20.25 to 4269.00.
Diesel
- Russia has lifted its ban on the majority of diesel exports while the gasoline ban remains in place.
- Europe’s ARA gasoil stocks fell by 3.8% last week.
- Nearby diesel prices have fallen around 30 cents this week.
- AAA reports the national average retail diesel price at $4.546, down 2 cents from last week.
Gasoline
- Europe’s ARA gasoline stocks rose by 1.2% last week.
- Nearby gasoline price have fallen nearly 20 cents this week.
- AAA reports the national average retail gas price at $3.746, down 9 cent from last week.
Propane
- Conway is trading at .6650 while Belvieu is trading at .6875.
- Conway is trading at 33% of WTI.
- The US is exporting 75% of production as of 9/29/23.
Natural Gas
- Weekend weather runs added 2 HDDs through the two-week forecast.
- Chevron workers are again proposing a strike at their Australian LNG facility.
- The EIA reported a smaller than expected injection of 86 Bcf for last week.
- Prompt natural gas is up nearly 30 cents this week.
Prompt WTI Spread: The prompt WTI spread has come in considerable with the weakness in the front end of the crude curve this week. The spread traded to a high of $2.60 in late September and has nearly cut that value in half just a little over a week later.
