Outlook: Natural gas deserves to lead off today as it trades down nearly 25 cents. It’s been a perfect storm for the natural gas bears this year as we went into the heating season with excess supplies and have been met with an extremely mild start to winter. Natural gas stocks remain 7% above 5-year average levels and will struggle to lose ground given the current forecasts. The rest of the complex is mixed with crude and gasoline lower while diesel trades up over a penny. Global demand remains the key concern controlling this downtrend and it has been a while since we’ve seen a compelling bullish driver develop. Fundamentals have started the week bearish with reports that global crude in floating storage is up 11%. The macros will jump back in the mix tomorrow with November inflation data due first thing in the morning.
Crude
- The US DOE announced intentions to buy oil for the SPR monthly through May 2024
- Global crude in floating storage rose by 11% last week per Vortexa data.
- Citigroup says OPEC+ will need to keep current supply cuts intact through 2024 to maintain balance.
- Bloomberg suggests US production expansion next year will offset the majority of OPEC’s production cuts.
- Baker Hughes reported US oil rigs fell by 2 to to 503 last week.
- US Nonfarm payrolls rose more than expected at 199k in November.
- US November CPI will be reported tomorrow morning at 7:30 am CT. Inflation is expected to decline from 3.2% to 3.1% y/y.
- As of 8:07 am CST: Brent crude oil down $0.13 to $75.71, US dollar index up $0.062 to 104.072 while the nearby e-mini S&P 500 futures contract is down 3.25 to 4604.00.
Diesel
- Last week’s COT report showed HO managed money traders net sold 7,203 contracts and are net long 28,972 contracts.
- The prompt contract backwardation has fallen below 3 cents in the last two sessions.
Gasoline
- Last week’s COT report showed RBOB managed money traders net sold 840 contracts and are net long 77,132 contracts.
- The prompt RBOB spread has flipped to contango since the expiration of the December contract. This is favorable for those rolling inventory hedges.
Propane
- Conway is trading at .6550 while Belvieu is trading at .6925.
- Conway Swap Oct24-Mar25 strip trading ~.7300.
- The EIA reported propane stocks fell by 1.7 million barrels last week.
- US propane stocks sit 13.8 million barrels above 5-year average levels.
Natural Gas
- Overnight weather runs removed 4 HDDs through the two-week forecast.
- The two-week weather outlook is 83 HDDs lower than last year and 48 HDDs lower than the 10-year average.
- Baker Hughes reported US natural gas rigs rose by 3 to 119 last week.
Jan-Feb HO Seasonal: The prompt diesel spread remains well above its 10-year average but also well off its highs from just a month ago. The continued downtrend could push this closer to 2 cents come month end.
