Outlook: It’s a relatively slow start to the week for the energy complex due to the market holiday. Crude and products are all starting off with a softer tone despite further military action from the US in the Red Sea over the weekend. The US has advised that the Bab el-Mandeb strait is still too risky for ships and a growing number of shippers are avoiding it. The Brent time spread has slowly crept higher with delayed oil deliveries gradually tightening the market. Due to the market holiday, weekly inventory data including preliminary polls will be delayed by a day with the EIA due to report Thursday at 10:00 am CT. Expect thin trade today with many market participants away from the desk.
- A US fighter aircraft shot down a cruise missile fired from a Houthi militant area toward a Navy destroyer in the Red Sea on Sunday, according to Bloomberg.
- Citigroup sees oil markets tightening with oil-on-water storage up 35 million barrels since the beginning of the Red Sea disruption.
- At least six oil tankers avoided the Bab Al-Mandab Strait over the weekend following the US retaliation last week (Reuters).
- Protestors in Libya are threatening to shut down two more oil and gas facilities with the 300,000 bpd Sharara oil field still offline (Reuters).
- Russia’s oil processing has seen a counter-seasonal decline in the first days of Jan. Typically, oil processing peaks in January due to higher diesel demand (BBG).
- Baker Hughes reported US oil rigs fell by 2 to 499 last week.
- As of 8:40 am CST: Brent crude oil down $0.79 to $79.50, US dollar index up $0.245 to 102.630 while the nearby e-mini S&P 500 futures contract is down 4.50 to 4811.00.
- Hedge funds have boosted net bullish Nymex diesel bets to the highest level in 5 weeks.
- Regional diesel basis remains heavily discounted when compared to 5-year ranges and in many places presents an opportunity to fill storage and hedge by selling futures.
- Hedge funds have cut net bullish Nymex gasoline bets to the lowest in 4 weeks.
- Regional gasoline basis is also at depressed levels providing an opportunity for refilling storage.
- Conway is trading at .8025 while Belvieu is trading at .8125.
- Conway Swap Oct24-Mar25 strip trading ~.7700.
- This rally in propane is presenting an opportunity to sell back propane swaps covering this winter if you feel like you have excess length due to the overall slow heating season.
- Weather revisions have shifted warmer in the extended forecast.
- Freeze-offs will remain an upside risk in Texas through the middle of January.
- Baker Hughes reported nat gas rigs fell by 1 to 117 last week.
Continuous Prompt HO Spread: