Outlook: The energy complex is red across the board today with natural gas once again leading the complex lower. A warmer forecast continues to populate in the deferred forecast, putting pressure on the prompt shoulder contract. For crude and oil products, risk-off sentiment may be at play here. Most of the fundamental chatter out there leans bullish as illustrated by most of the bullet points below, however, an overall larger-than-expected contraction in Chinese exports may be overshadowing. The US dollar is also making a move higher which can create bearish pressure for dollar-based commodities. Despite no EIA report tomorrow, the API will still release its weekly survey this afternoon to give us an idea of any fundamental shift last week.
Crude
- Russia’s 4-week average seaborne crude exports fell 400,000 bpd to 3.24 mbpd despite a small w/w increase.
- Chinese crude imports in October were up 13.5% y/y and 3.6% m/m.
- A record number of supertankers are heading toward the US to load oil over the next three months.
- OPEC+ remains optimistic for oil demand growth despite ongoing economic challenges, according to their Secretary General Haitham Al-Ghais.
- Yesterday, the US announced its intent to purchase 3 million barrels for the SPR to be delivered in January.
- The API will release its inventory survey at 3:30 pm CT.
- The EIA will release its STEO for October around noon.
- The EIA inventory stats for this week will be reported with next week’s data due to maintenance.
- As of 7:50 am CST: Brent crude oil down $1.62 to $83.56, US dollar index up $0.424 to 105.640 while the nearby e-mini S&P 500 futures contract is down 8.25 to 4375.00.
Diesel
- China’s exports of oil products fell 5% to a 4-month low m/m in October to 5.17 mbpd.
- Prompt continuous diesel is trending toward support at its 200-day moving average near $2.8050.
Gasoline
- Gasoline remains most resistant to downward moves as it found support near $2.20.
- US pump prices hit an 8-month low last week but has yet to support consistent demand growth.
Propane
- Conway is trading at .6275 while Belvieu is trading at .6450.
- Conway Swap Oct24-Mar25 trading ~.7325.
- Spot Conway is trading at 33% of WTI.
- The US is exporting 74% of production as of 10/27/23.
Natural Gas
- Overnight weather runs removed 7 HDDs through the two-week forecast.
- The beginning of November is forecast to be warmer than the 10-year average.
- Total gas storage is 5.7% above 5-year average levels.
- The EIA reported US oil production growth in 2022 added 15.5 Bcf/d in associated natural gas production.
WTI Options Skew: The price for bullish call options is no longer at a premium to bearish puts. The conflict in the Middle East allowed for the uncommon event to occur, however, fears of escalations impacting oil have all but faded.
