Outlook: Energy markets are digesting the news from over the weekend which involved Hamas launching an attack on Israel. There is no immediate supply disruption on the oil side however one natural gas facility has been shut down for safety. The Strait of Hormuz will be closely watched as a key shipping channel that could face disruption if tensions escalate. Saudi Arabia was also in talks with the US last week about mediating talks with the US and Israel and possibly increasing production next year, but this will likely be put on hold. The situation will remain volatile as traders try to assess the appropriate amount of risk premium. Macroeconomic concerns that drove the selloff last week may be tabled until the Fed minutes are released on Wednesday.
Crude
- Crude oil gapped higher at the open on Sunday following Hamas’s Israel attack.
- Goldman Sachs sees no immediate impact on oil inventories from the Israel attacks.
- Greater supply risks from the conflict will arise if Iran gets involved.
- Saudi Arabia officials told the White House that they were willing to raise output next year as part of the proposed Israel deal.
- OPEC forecast oil consumption will rise 16% over the next two decades to reach 116mbpd by 2045.
- US Treasury Secretary Janet Yellen said the US will likely take steps to enforce the $60/barrel Russian price cap.
- Global crude in floating storage fell by 15% last week to 70.04 million barrels.
- Baker Hughes reported oil rigs fell by 5 to 497 last week.
- As of 8:27 am CST: Brent crude oil up $2.74 to $87.30, US dollar index up $0.347 to 1063.390 while the nearby e-mini S&P 500 futures contract is down 18.25 to 4322.00.
Diesel
- Russia has lifted its ban on pipeline and seaborne exports for diesel while rail export bans remain in place.
- Last week’s COT report showed managed money net bought 1,606 contracts and are net long 39,667 contracts.
Gasoline
- Russia’s gasoline export ban remains in effect despite the easing of diesel export restrictions.
- Last week’s COT report showed managed money net sold 2,985 contracts and are net long 48,436 contracts.
Propane
- Conway is trading at .6600 while Belvieu is trading at .6825.
- 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’s Australian LNG Union will resume strikes next week.
- Dutch TTF is up over 10% this morning after Israel ordered Chevron to stop production at their Tamar platform for safety.
- Baker Hughes reported nat gas rigs rose by 2 to 118 last week.
Continuous Daily WTI: WTI gapped higher last night following fresh conflict in the Middle East. No immediate supply disruptions are being observed but the risk of disruption has grown significantly. The gap will be a downside target if sentiment shifts negative.
