Outlook: Energy markets are inching higher this morning with a lack of fresh drivers. The US is looking to act and free up trade flows through the Red Sea which may be taking some of the initial risk premium out of the market and slowing momentum. Despite the risk for attacks, alternate trade routes remain sufficient for moving oil across the globe and upside risk may remain limited. The US released its DPR yesterday which showed DUCs falling to their lowest levels since April. Despite falling rig counts this year, oil production has risen to record levels as producers have become more efficient and drilled more efficient wells. The declining DUCs does leave the market susceptible to slowing production, however, the EIA still projects growth through 2024. The news docket is quiet today but we’ll get APIs this afternoon before the EIA reports inventories tomorrow at 9:30 am CT.
Crude
- The US has launched a multinational operation to protect shipments through the Red sea.
- The Houthis responded to the announcement stating US security initiatives would not deter them.
- Russia has banned the sale of oil to countries observing the G7s price cap.
- Russia’s crude processing increased by 368,000 bpd to 5.7 mbpd with curtailed refineries due to storms coming back online. This is the highest processing rate since April.
- The number of drilled-but-uncompleted oil and gas wells fell by 83 to 4,415 in November – the lowest on record per the EIA.
- Today is LTD for January WTI futures.
- Reuters estimates crude stocks fell by 2.2 million barrels last week.
- The API will report its inventory survey at 3:30 CT.
- As of 8:43 am CST: Brent crude oil up $0.49 to $78.44, US dollar index down $0.265 to 102.296 while the nearby e-mini S&P 500 futures contract is up 11.25 to 4804.00.
Diesel
- Reuters estimates diesel stocks rose by 1 million barrels last week.
- Regional diesel basis levels continue to trend below 5-year average levels for this time period.
Gasoline
- Reuters estimates gasoline stocks rose by 1.7 million barrels last week.
- Prompt RBOB rejected a move above its 50-day moving average yesterday.
Propane
- Conway is trading at .6250 while Belvieu is trading at .6700.
- Conway Swap Oct24-Mar25 strip trading ~.7100.
Natural Gas
- Overnight weather runs removed 4 HDDs through the two-week forecast.
- Dutch TTF is off 8% today, erasing most of yesterday’s rally.
- European gas storage sits at 89% full compared to 77% full last year during this time period.
- Reuters estimates natural gas stocks fell between 70-75 Bcf last week.
Red Sea Oil Flows: Russia’s war in Ukraine shifted global trade flows to the Red Sea resulting in a 140% increase in oil exports through the corridor. Despite recent disruptions, vessel redirection opportunities should allow flows to remain stable.
