Outlook: Energies are relatively idle this morning as they look for fresh direction following yesterday’s sharp move lower. The US deal with the Saudis was a significant development for the geopolitical risk landscape and provided the bearish shock needed to push oil back below $80. With prices entering a lower band, traders are showing more conviction that OPEC+ will maintain production cuts through the end of the year. With a considerable amount of oil production withheld from the market, support may be found sooner rather than later. The broader trend may be dictated on whether or not global supplies trend toward tightness or surplus. From a technical standpoint, there is room for prices to slide further to end the week until tipping into more compelling oversold levels. Funds have likely offloaded length again this week and the long/short ratios will be worth monitoring as the dust settles starting next week. Nonfarm payroll data tomorrow morning could help dictate sentiment heading into the weekend.
Crude
- The US and Saudis are nearing a historic pact that would offer the kingdom security guarantees and lay out a possible pathway to diplomatic ties with Israel. (BBG)
- 26 out of 30 in a Bloomberg survey expect OPEC+ to extend production cuts into the second half of the year.
- WTI closed below its 200-day moving average for the first time since March yesterday.
- WTI closed below its lower Bollinger band yesterday which can indicate oversold conditions.
- The EIA reported US crude stocks rose 7.2 million barrels last week.
- US crude exports fell 1.2 mbpd last week according to the EIA.
- The Fed left interest rates unchanged as expected yesterday.
- Nonfarm Payroll data will be reported tomorrow morning for a fresh look at labor conditions.
- As of 8:48 am CST: Brent crude oil up $0.26 to $83.70, US dollar index up $0.046 to 105.801 while the nearby e-mini S&P 500 futures contract is up 12.25 to 5058.00.
Diesel
- The EIA reported diesel stocks fell 732,000 barrels last week.
- 4-week average diesel demand remains nearly 7% below 5-year average levels and 8% below year-ago levels.
- Refinery utilization fell 1% to 87.5% last week.
Gasoline
- The EIA reported gasoline stocks rose unexpectedly by 344,000 barrels last week.
- Gasoline demand rose 2.3% last week to 8.6 mbpd. 4-week average gasoline demand remains ~4% above 5-year average levels.
Propane
- Conway is trading at .6950 while Belvieu is trading at .7250.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7600.
- Conway propane is trading at 37% to WTI.
- The EIA reported a smaller than expected build of 247,000 barrels last week.
- Propane markets fell with the complex yesterday despite the small inventory build. Values down the curve softened considerably with winter strips now trading near 75c.
Natural Gas
- Overnight weather runs added 1 TDDs for the two-week forecast.
- Corpus Christi began to reduce feedgas intake yesterday in preparation for maintenance.
- Reuters estimates nat gas stocks rose 52 to 56 Bcf last week.
Continuous Daily WTI: WTI closed below its lower Bollinger yesterday and is approaching oversold reinforcement with RSI values near 30.
