Outlook: The energy complex is working lower once again today, possibly reflecting a continuation of yesterday’s negative sentiment. Misreporting of an agreed ceasefire quickly showed the market how much risk premium was pumped into energies yesterday. Despite the false report, an indication that a deal is on the table has been enough to prevent buyers from adding that premium right back in. Additional bearish measures are certainly weighing in this week to add to the negative tone. A struggling Chinese equity market following the liquidation of Evergrande this week and 435,000 bpd of crude processing coming offline in the US are two key elements. Nonfarm payroll data for January nearly doubled up on estimates today reflecting a strong labor market. A strong labor market could cause problems for the Fed's fight against inflation and could support the narrative of higher for longer interest rates. The US dollar is up nearly 700 points following the report.
Crude
- WTI is on track for its largest weekly drop since November.
- A false report of an agreed ceasefire by Israel/Hamas caused a sharp selloff yesterday.
- OPEC oil output fell by 490,000 bpd in January to 26.57 mbpd.
- Yesterday, BP’s 435kbpd Whiting Refinery completely shut down due to a power outage.
- Chinese equities markets are sharply lower on the week, raising concern of financial contagion.
- The IMF forecasts China’s economic growth to slow to 4.6% in 2024.
- January Nonfarm Payrolls were reported at 353k vs 185k est. The US dollar has jumped higher post-report.
- Baker Hughes will report rig counts at 12:00 pm CT.
- As of 8:11 am CST: Brent crude oil down $0.52 to $78.18, US dollar index up $0.692 to 103.737 while the nearby e-mini S&P 500 futures contract is up 2.25 to 4930.00.
Diesel
- Europe’s ARA diesel stocks rose 15.5% over the last week.
- Singapore middle distillate stocks rose to a 3-week high of 7.085 million barrels over the last week.
- Spot diesel basis throughout the country remains sharply discounted, favorable for filling storage and hedging for future delivery.
Gasoline
- Europe’s ARA gasoline stocks rose 13% over the last week.
- Singapore light distillate stocks rose to a 7-month high of 14.221 million barrels over the last week.
Propane
- Conway is trading at .8675 while Belvieu is trading at .9450.
- 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 reported a natural gas draw of 197 Bcf for last week. This was the 5th largest week-4 draw in history.
- Natural gas stocks are now only 54 Bcf above year-ago levels and 130 Bcf above 5-year average levels.
Continuous Daily WTI: The 50-day moving average may look to provide support today, however, outside forces may be too strong to respect this technical level. A close below paves the way for a return to $70.
