Outlook: Crude, gasoline, and diesel will all look to sneak out with weekly gains if they can hold firm today. Energies have found fundamental support this week from extreme cold shutting off crude production in the North and shutting in refineries in the South. On a global level, Libya continues to lose production due to protests at its Sharara oil field. Turbulence in the Red Sea is slowly constricting more oil flows with Goldman Sachs estimating 1.2 million bpd currently taking alternate routes. Declines are expected to continue with further attacks from the Houthis overnight. This week, the plethora of bullish drivers influencing prices face major headwinds with a hawkish shift in macroeconomic sentiment. Fed fund futures now project only a 50% chance of a rate cut in March, down from 75% just a week ago. A more restrictive view from the Fed would taper demand and dilute the effects of unplanned supply outages, similar to what we’ve seen this week.
Crude
- Houthi militants in Yemen fired missiles at an American commercial vessel overnight. (BBG)
- Extreme cold weather has shut roughly 1.5 mbpd of the Gulf’s refining capacity, representing a 15% decline in overall capacity. (BBG)
- Refinery freeze-offs can contribute to heavier spring maintenance depending on the seriousness of the malfunction.
- North Dakota’s crude production remains down 40% due to cold weather. (Reuters)
- Libya’s crude production remains down ~350,000 bpd due to ongoing protests. (Reuters)
- The EIA reported crude stocks fell by 2.5 million barrels last week vs -200,000 est.
- US crude exports returned back above 5mbpd last week with a 1.7 mbpd weekly increase.
- As of 8:40 am CST: Brent crude oil up $0.43 to $79.53, US dollar index down $0.078 to 103.460 while the nearby e-mini S&P 500 futures contract is up 6.50 to 4817.00.
Diesel
- The EIA reported diesel stocks rose 2.3 million barrels last week.
- US diesel demand rose 6.2% last week to 3.6 mbpd.
- Regional diesel basis remains heavily discounted to 5-year average levels. Filling storage and selling futures can put you in a long basis scenario to take advantage of normalization for future delivery.
Gasoline
- The EIA reported gasoline stocks rose 3 million barrels last week.
- US gasoline demand saw a marginal decline of 56,000 bpd last week to 8.2 mbpd.
Propane
- Conway is trading at .9200 while Belvieu is trading at .8175.
- Conway Swap Oct24-Mar25 strip trading ~.7900.
- 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.
Natural Gas
- Overnight weather runs were unchanged in the two-week forecast.
- Natural gas production is swiftly recovering production losses from earlier freeze-offs.
- The EIA reported natural gas stocks fell by 154 Bcf last week which fell within estimates.
- Nearby natural gas futures are on track to decline over 70 cents this week.
Continuous Weekly WTI: Another week passes with a failed test of the 200-week moving average for weekly crude.
