Outlook: Energies are on track for a positive week if they can remain in the green today. A supportive move into the weekend will be key for any upward momentum to spill over to next week. Although sentiment has shifted this week, bearish elements still lurk. A dovish pivot from the Fed was an unexpected development that may have brought back some speculative buying this week but economic data will need to support this move to maintain traction. The broader downtrend should not be discounted, and fresh drivers will need to develop to at a minimum form stabilization. Keep an eye on crude as it hovers around its 200-week moving average as a key technical indication for the medium-term trend.
Crude
- WTI is finding support on its 200-week moving average at $70.45. A close below this level would be disappointing for the bulls after the run this week.
- A dovish Fed pivot has helped crude bounce off multi-month lows.
- Fed fund futures suggest an interest rate cut as early as March.
- China’s industrial sales rose 6.6% in November vs 5.6% est.
- Chinese refiners have cut processing rates to nine-month lows.
- The prompt WTI spread has gone deeper in contango despite the bullish move in the individual contracts this week.
- S&P global manufacturing data will be reported at 8:45 am CT.
- As of 8:35 am CST: Brent crude oil up $0.24 to $76.85, US dollar index up $0.399 to 102.354 while the nearby e-mini S&P 500 futures contract is down 8.25 to 4713.00.
Diesel
- Regional diesel basis remains soft throughout the country and the backwardation in the prompt spread continues to fall. Both are favorable for filling storage and selling futures to hedge.
- There was a fire at the Marathon Galveston Bay refinery yesterday, however no disruption of service was reported.
- European diesel stocks rose 1% last week.
Gasoline
- European gasoline stocks fell 11% last week.
- AAA reports the national average retail gas price at $3.087, down 10 cents from a week ago. This is the lowest national average in 904 days.
Propane
- Conway is trading at .6125 while Belvieu is trading at .6650.
- Conway Swap Oct24-Mar25 strip trading ~.7100.
- Oct24 Propane swaps are changing hands below 70 cents this week for those looking to add an early layer for dryer gas.
- At 95.9 million barrels, propane stocks are 13.6 million barrels above 5-year average levels.
Natural Gas
- Overnight weather runs removed 4 HDDs through the two-week forecast.
- The two-week weather forecast will end the week down 158 HDDs below last year and 62 HDDs below 10-year average levels.
- The EIA reported nat gas stocks fell by 55 Bcf last week.
- Natural gas stocks are 245 Bcf above last year’s levels and 260 Bcf above 5-year average levels.
Daily US Dollar: A volatile week for the US dollar which fell over 1500 points through two sessions. A cheaper US dollar can stimulate exports which can lend support to energies.
