Outlook: Energies are lower this morning partially fueled by a bearish API survey late in the session yesterday. The API sees crude and oil products all seeing inventory builds for last week. The print that caught traders' attention was a 4.3 million barrel build for Cushing crude stocks. The crude market has been in contango despite Cushing stocks being near operational minimums and now replenishment could further reinforce this trend. This also allowed for a technical breach of the recent low set back in mid-November. The 200-week moving average on the daily continuous crude chart at $70.35 may be the last line of defense before the psychological level at $70 is challenged. Unless the EIA delivers a bullish surprise this morning, the market looks motivated to develop a $60 handle.
Crude
- A Reuters poll suggests the OPEC 10 oil production fell 130,000 bpd in November to 22.69 mbpd. This is below their implied target of 23.377 mbpd. OPEC 13 production fell by 90,000 bpd to 27.81 mbpd.
- Prompt WTI has breached the recent low of $72.16 and trading to its lowest level since early July.
- Barring a significant fundamental change, crude looks motivated to test a sub $70 handle.
- Reuters estimates crude stocks fell by 1.4 million barrels last week.
- The EIA will report inventories at 9:30 am CT.
- The API reported crude inventories rose by 600,000 barrels yesterday.
- US ISM Services PMI came in better than expected yesterday and JOLTS Jobs hit a 2.5 year low at 8.7 million openings.
- Nonfarm payrolls will be reported on Friday
- As of 8:06 am CST: Brent crude oil down $0.99 to $76.21, US dollar index down $0.161 to 103.887 while the nearby e-mini S&P 500 futures contract is up 20.25 to 4595.00.
Diesel
- Chicago diesel basis fell sharply again yesterday. If you are in this market and observing cash discounts, filling storage and selling futures as a hedge may be advantageous.
- Group 3 diesel basis also remains discounted to 5-year average levels.
- Reuters estimates diesel stocks rose by 1.5 million barrels last week.
- The API survey showed diesel stocks rose by 1.9 million barrels last week.
Gasoline
- Reuters estimates gasoline stocks rose by 1 million barrels last week.
- The API survey showed gasoline stocks rose by 2.8 million barrels last week.
Propane
- Conway is trading at .6700 while Belvieu is trading at .7050.
- Conway Swap Oct24-Mar25 strip trading ~.7350.
- OPIS estimates propane stocks fell by 1.39 million barrels last week.
Natural Gas
- Overnight weather runs removed 3 HDDs through the two-week forecast.
- France was the primary destination for US LNG with over two-thirds of all exports heading to Europe.
- Reuters estimates nat gas stocks fell between 70 and 107 Bcf last week.
WTI Forward Curve: Crude remains in contango to the May contract. The prompt spread is trading over -20c and the API print calling for a Cushing build of over 4 million barrels could pressure this lower.
