Outlook: The energy complex is starting the week positive and may be experiencing spillover from a Friday headline. Several OPEC+ sources have hinted that the group may consider deepening production cuts in 2024. The global crude market has not developed the deficits that were previously forecasted and lack of demand growth out of China could be the key driver. If OPEC+ feels like there remains an imbalance, further cuts would not be surprising. Brent prices below $85 are also not favorable for many members of the group who feel that are losing revenue on the reduced volumes. Further comments could cause volatility spikes this week, especially if liquidity fades into the holiday. The group will meet on Sunday, November 26th. Oil money managers have decreased their bullish bets considerably over the last few weeks as markets tumbled. Macroeconomic data will continue to influence how the funds use oil to hedge their portfolios.
Crude
- An Israeli-owned ship was seized in the Red Sea by Houthi rebels, raising fears that shipping disruptions could become more frequent in one of the world’s busiest shipping routes.
- Three OPEC+ sources said on Friday that the producer group will consider if additional production cuts are necessary when they meet on November 26th.
- The UAE will increase its target oil production by 135,000 bpd in January due the OPEC reallocations.
- Kuwait’s Zour refinery which was shut down early this month, is expected to reach full capacity (615,000 bpd) within the next couple weeks.
- The prompt WTI spread fell to its lowest level since February at -33 cents.
- Expect liquidity to thin out quickly heading into the holiday weekend which can exacerbate price moves.
- Baker Hughes reported US oil rigs rose by 6 to 500 last week.
- As of 8:41 am CST: Brent crude oil up $1.36 to $81.97, US dollar index down $0.267 to 103.650 while the nearby e-mini S&P 500 futures contract is up 9.25 to 4536.00.
Diesel
- US oil refiners are expected to have 264,000 bpd of capacity offline this week, down 559,000 bpd from last week per IIR.
- China’s diesel exports were up 4.4% in October vs last year.
- The National Weather Service is forecasting above-average temperatures in Dec, Jan, and Feb for the Northeast, which may bail out low heating oil stocks heading into the heating season.
Gasoline
- China’s gasoline exports fell 20% in October vs last year.
Propane
- Conway is trading at .6200 while Belvieu is trading at .6400.
- Conway Swap Oct24-Mar25 strip trading ~.7000.
- Spot Conway is trading at 34% of WTI.
Natural Gas
- Weekend weather runs removed 15 HDDs through the two-week forecast.
- Natural gas futures remain under pressure as El Nino conditions have held temperatures above normal.
- Baker Hughes reported US natural gas rigs rose by 4 to 114 last week.
COT Report: Hedge fund's net length has fallen to its least bullish level in 20 weeks. 4 consecutive weeks of declines have caused a shift in overall market sentiment. Market fundamentals have also not displayed the deficits that were projected for the end of the year.
