Outlook: A big risk on move today has the market off and running. Crude and diesel are up 4% already on the morning while gasoline doesn’t trail far behind. Fear of escalation in the Middle East over the weekend is likely the primary driver today. Adding to the momentum, the US stepped in yesterday imposing further sanctions on vessel owners who have transported Russian oil above the $60 price cap. These steps could contribute to a tighter marketplace if sanctions are successful. Russia is also coming out of refinery maintenance season and their domestic appetite for crude should see gains. Baker Hughes will report rig counts today which could show further declines despite US crude production reaching record levels last week. Crude producers have become more efficient at pumping oil and are taking advantage of the current market dynamics.
Crude
- The US imposed sanctions on two Russian crude companies and blocked two vessel owners from carrying oil due to violations of the price cap.
- Iran’s foreign minister reaffirmed the country’s support for Palestine which may be adding upside risk today.
- The market may be in risk-on mode to protect against any escalation from the war over the weekend.
- Russia’s offline primary oil refining capacity fell 22% in Oct.
- The EIA reported crude stocks rose by 10.2 million barrels last week.
- Oil stocks at Cushing declined by 319,000 barrels.
- US crude production rose to a record 13.2 mbpd last week.
- Baker Hughes will report rig counts at 12:00 pm CT.
- As of 7:51 am CST: Brent crude oil up $3.85 to $89.85, US dollar index down $0.206 to 106.393 while the nearby e-mini S&P 500 futures contract is up 10.25 to 4390.00.
Diesel
- Yesterday, Russia increased its expected October diesel exports to 334,000 bpd.
- The EIA reported diesel stocks fell by 1.8 million barrels last week.
- US diesel stocks have fallen to a 7-week low as of last week.
- US diesel demand fell by 3.8% to 3.6 mbpd w/w.
Gasoline
- The EIA reported gasoline stocks fell by 1.3 million barrels last week.
- US gasoline demand rose by 7.1% w/w to 8.5 mbpd.
Propane
- Conway is trading at .6625 while Belvieu is trading at .6875.
- Conway Swap Oct24-Mar25 trading ~74.75c.
- Spot Conway is trading at 34% of WTI.
- The US is exporting 81% of production as of 10/6/23.
- US propane stocks rose less than expected last week with a 108,000 barrel build.
Natural Gas
- Overnight weather runs removed 6 HDDs through the two-week forecast.
- Dutch TTF is on track to close up 39% on the week.
- The EIA reported an injection of 84 Bcf for last week.
- Total working gas inventories are 163 Bcf above the 5-year average.
Continuous Daily ULSD: The diesel market is showing a strong move today up over 4%. The market has quickly run up to resistance at its 50-day moving average near $3.18. A risk on move ahead of the weekend and tight global supplies are providing tailwinds today.
