Outlook: The energy complex has a negative tone to start the week amidst light trade due to the market holiday. While the US goes on Holiday, China returns from its Lunar New Year holiday and should give the global market some fresh eyes. Early indications are that travel and spending exceeded pre-pandemic levels in China for the holiday week which may pause the doom and gloom view for now. Traders will certainly look for more before becoming optimistic about Chinese demand. Turbulence in the Red Sea continued over the weekend with an oil tanker being struck on Saturday and a British ship being forced to evacuate due to damage. Crude spreads continue to expand reflecting a tighter environment and shipping constraints are a likely contributor. Expect trade to remain thin today through the unofficial settlement at 1:30 pm CT.
Crude
- On Saturday Houthi fighters attacked an India-bound oil tanker, while a US ship was targeted by missiles this morning.
- Fed policymakers expressed the need for patience over expectations for rate cuts this year following higher than expected PPI data last week.
- The prompt crude spread traded to a high of $1.20 this morning, highest since October.
- ATM crude option volatility has fallen to its lowest level since September.
- Baker Hughes reported US oil rigs fell by 2 to 497 last week.
- China returns from its week long Lunar New Year holiday this week.
- Chinese travel and spending during the Lunar New Year exceeded levels from before the pandemic. (BBG)
- As of 8:12 am CST: Brent crude oil up $0.23 to $83.09, US dollar index up $0.195 to 104.491 while the nearby e-mini S&P 500 futures contract is down 3.25 to 5043.00.
Diesel
- Nymex heating oil net length rose by 10k lots last week, the most since 2020.
- Nearby HO is testing support at its 200-day moving average today.
Gasoline
- Nymex RBOB net length rose by 5,183 positions to 62,140 last week.
Propane
- Conway is trading at .8575 while Belvieu is trading at .9225.
- Conway Swap Oct24-Mar25 strip trading ~.8100.
- Conway propane is trading at 48% value to WTI.
Natural Gas
- Natural gas futures put in another fresh contract low to start the week at $1.522.
- The EIA reported natural gas stocks fell 49 Bcf last week.
- Total gas inventories are 255 Bcf above last year and 348 Bcf above 5-year average levels.
- Last week, the US House of Representatives voted to pass legislation that would undo the Biden administration’s freeze on new LNG export approvals.
Chinese Travel Demand: Early indications out of China are positive for travel and spending, which exceeded pre-pandemic levels.
