Outlook: The energy complex is off to a slower start today due to light trade and a lack of fresh drivers. Energies saw a sharp selloff yesterday which largely shrugged off what appeared to be a more bullish inventory report from the EIA. A larger-than-expected crude draw and strong recoveries in oil product demand were not enough to break markets from a broader negative sentiment. Crude is set to close the year down over 10% and has staged itself at a pivotable point to start 2024. The consensus is growing for a soft landing which could support energy demand next year, but its important to remain cautious when too many people sit on one side of the boat. The economic environment remains fragile, and any turbulence will present significant downside risk. Geopolitical risk will remain the upside driver with wars ongoing on multiple fronts and growing tensions with Iran. The market feels well supplied on a global scale as it sits today but this dynamic can shift quickly if an unplanned long-term supply disruption occurs.
Crude
- China issued its first batch of fuel export quotas for 2024 totaling 19 million metric tons, which was unchanged from last year’s levels.
- Shippers returning to the Red Sea has put downward pressure on energies this week.
- For the year, prompt WTI is down ~$8.
- OPEC is cutting roughly 6 mbpd of oil production representing 6% of global supply as we head into 2024.
- The EIA reported a larger-than-expected crude draw of 7.1 million barrels last week.
- The bulk of the crude draw fell in the Gulf as refiners look to destock ahead of the New Year for tax purposes.
- US refinery utilization rose 0.9% to 93.3% last week which is 3.7% above 5-year average levels.
- As of 8:27 am CST: Brent crude oil up $0.54 to $77.69, US dollar index up $0.124 to 101.353 while the nearby e-mini S&P 500 futures contract is down 3.25 to 4828.00.
Diesel
- The EIA reported diesel stocks rose by 741,000 barrels last week.
- US diesel demand rose 4% w/w to 3.9 mbpd.
- For the year, prompt HO trades down around 75 cents.
- TSA total traveler throughput on a 7-day average is 4.4% above 2019 levels.
- Today is LTD for January HO.
Gasoline
- The EIA reported gasoline stocks fell by 670,000 barrels last week.
- Gasoline demand rose 4.7% w/w to 9.1 mbpd.
- For the year, prompt RBOB trades down around 39 cents.
- Today is LTD for January RBOB.
Propane
- Conway is trading at .6750 while Belvieu is trading at .7150.
- Conway Swap Oct24-Mar25 strip trading ~.7500.
- The EIA reported propane stocks fell 9 million barrels in this week’s report which accounted for overstated inventories over the last month.
- With the adjustment, propane stocks have dipped below the 5-year seasonal high band.
Natural Gas
- Overnight weather runs removed 2 HDDs through the two-week forecast.
- The EIA reported natural gas stocks fell 87 Bcf last week.
- Total working gas inventories remain 348 Bcf higher than last year and 316 Bcf higher than the 5-year average.
- For the year, prompt NG trades down around $1.90.
Continuous Daily WTI: $80.57 represents the open for 2023.
