Outlook: Energy markets remain choppy but are trending higher this morning. OPEC+ reviewed its production cuts today and ultimately left them unchanged as expected. Ship tracking data has suggested that exports from members participating in the cuts have remained steady diluting the impact so far. The voluntary cuts will remain in place through March when the group will meet again to review an extension. In positive news today, contraction in Germany’s manufacturing sector eased in January. US Manufacturing data is expected to remain in contraction when reported later this morning but a higher-than-expected print could help the market find firmer footing today. US diesel demand continues to struggle amidst contracting manufacturing sectors and would welcome a turn of the corner.
Crude
- OPEC+ made no adjustments to their 2.2 mbpd production cuts at the meeting today. The group will meet again in March. (Reuters)
- China’s private refiners are seeing declining margins and may look to cut production. (BBG)
- North Dakota’s crude production is now only off less than 50,000 bpd after weather-related production loss last week. (Reuters)
- WTI open interest has risen to its highest level since October.
- The Fed left interest rates unchanged yesterday while the press conference following leaned hawkish.
- The EIA reported US crude stocks rose 1.2 mb vs -2.0 mb est.
- The EIA reported US crude production recovered 700,000 bpd last week to 13 mbpd.
- US ISM Manufacturing will be reported at 9:00 am CT.
- Nonfarm Payrolls will be reported tomorrow morning at 7:30 am CT.
- As of 7:58 am CST: Brent crude oil up $0.66 to $81.21, US dollar index 218 $0.071 to 103.492 while the nearby e-mini S&P 500 futures contract is up 19.25 to 4889.00.
Diesel
- The EIA reported diesel stocks fell by 2.5 million barrels last week.
- US diesel demand on a four-week average basis remains 5% below year-ago levels.
- Spot diesel basis throughout the country remains sharply discounted, favorable for filling storage and hedging for future delivery.
Gasoline
- The EIA reported gasoline stocks rose 1.1 million barrels last week.
- US gasoline inventories are at their highest levels since February 2021.
- US gasoline demand on a four-week average basis remains 1% below year-ago levels.
Propane
- Conway is trading at .8650 while Belvieu is trading at .9100.
- Conway Swap Oct24-Mar25 strip trading ~.8100.
- The EIA reported a larger than expected draw in propane stocks of 5.3 million barrels.
- US propane demand rose 26.5% w/w to 1.9 mbpd.
Natural Gas
- Overnight weather runs added 4 HDDs in the two-week forecast.
- The EIA is expected to report a draw of 200 Bcf for last week.
- European gas storage remains 70.6% full, higher than the 5-year seasonal average of 57.6%.
- Mild weather is expected for Europe through February.
Chinese Oil Refining Margins: Chinese oil refiners are seeing margins decline which could provoke cutbacks in production. Declining margins is a bearish indicator for Chinese demand which is expected to lead global oil demand growth again this year.
