Outlook: Energies are looking to draft support from the momentum established yesterday. A bullish EIA report yesterday is providing fundamental backing to higher prices but recent rallies have been met with resistance with crude tipping above $80 over the last month. Geopolitical disruptions have been slowly tightening the global fundamental outlook and with the IEA releasing its monthly report today, there is a unanimous opinion among the three major groups (EIA, IEA, OPEC) that global oil will be at a deficit through 2024. The macroeconomic outlook starts to turn dovish halfway through the year with major economies, including the US, expected to begin lifting interest rates. This situation remains delicate and any delays to rate cuts could cause demand to underperform. Today’s producer price index data ran hot relative to estimates which would be a pattern that would incentivize the Fed to keep rates higher for longer.
Crude
- The IEA released its monthly report today and raised their 2024 oil demand forecast by 110,000 bpd to 1.3 mbpd.
- The IEA now sees a supply deficit for all of 2024 following the extension of OPEC+ cuts.
- OPEC estimates 2024 oil demand growth at 2.25 mbpd.
- China’s teapot refiners have decreased operating rates to a two year low which creates a negative view for Chinese crude demand.
- Continuous WTI is testing psychological resistance at $80 today .
- The EIA reported crude stocks fell by 1.5 million barrels last week vs +1.5 mb est.
- US crude production fell for the second straight week to 13.1 mbpd.
- As of 8:12 am CST: Brent crude oil up $0.55 to $83.97, US dollar index up $0.173 to 102.962 while the nearby e-mini S&P 500 futures contract is up 6.25 to 5174.00.
Diesel
- The EIA reported diesel stocks rose by 900,000 barrels last week vs -0.2 mb est.
- US diesel demand fell 17% w/w but rose on a 4-week average basis.
- Net diesel exports exceeded 1 million bpd last week to hold implied demand stronger.
- Russian Feb seaborne oil product exports were down 1.5% m/m per Reuters calculations.
Gasoline
- The EIA reported gasoline stocks fell 5.7 million barrels last week vs -1.9 mb est.
- Gasoline demand remained above 9 mbpd last week which is considered a strong seasonal number.
- US gasoline exports nearly hit 1 mbpd last week which helped pressure stocks.
Propane
- Conway is trading at .7225 while Belvieu is trading at .7775.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7850.
- US propane stocks saw a larger than expected build of 678,000 barrels last week.
- Stocks found relief from a 26% drop in exports last week.
Natural Gas
- Overnight weather runs removed 4 HDDs in the two week forecast.
- The EIA is expected to report a very slight draw for stocks last week.
- Physical gas prices at the Waha Hub in the Permian Basin have traded below zero for three consecutive days with product becoming backlogged due to maintenance.
Continuous Daily WTI: WTI will look to hold above $80 today if it wants to move out of its 3-week range.
