Outlook: The energy complex is lower to start the week and this follows a sharp selloff on Friday. A risk-off move across several commodities today could be a factor with managed money holding elevated levels of length last week. A reaction to President Biden dropping out of the presidential race and endorsing Vice President Kamala Harris may also be weighing but market influence should be limited until a candidate is officially announced. Harris would be expected to have a heavier green agenda which could pressure the oil industry if ultimately elected. Given the window of time till the election, we don’t expect volatile market movements based on presidential politics near-term. Bullish risks are still lurking with geopolitical escalations over the weekend in Russia and the Middle East and wildfires still raging in Canada. Refined products are expected to face headwinds relative to crude in the absence of disruption with refinery utilization above seasonal norms.
Crude
- President Biden has dropped out of the 2024 presidential race and endorsed his VP Kamala Harris.
- The deadline for democrats to nominate their candidate is at their convention ending August 22nd.
- Out-of-control wildfires in Canada are within 10 kilometers of 348,000 bpd of output. (BBG)
- China is ramping up purchases of Middle East crude for September which could signal an increase in refining activity coming out of maintenance.
- UBS expects lower crude exports to push oil prices to $90 in the coming weeks.
- WTI net length rose to a 9-month high last week with weekly volume rising to its highest level since 2022.
- Baker Hughes reported US oil rigs fell by 1 to 442 last week.
- Today is LTD for August WTI.
- As of 8:55 am CST: Brent crude oil down $0.80 to $81.83, US dollar index down $0.059 to 104.349 while the nearby e-mini S&P 500 futures contract is up 46.25 to 5598.00.
Diesel
- Ukrainian drone strikes hit Russia’s 240,000 bpd Tuapse refinery over the weekend. The refinery primarily produces diesel and fuel oil.
- Exxon’s Joliet refinery remains offline with a resumption of service estimated at 3 weeks. Chicago basis values remain strong.
- Money managers decreased net length by 3.4k lots last week.
Gasoline
- RBOB trades near a ~3 cent premium over diesel.
- Crack spreads are seeing a marginal recovery today but could face further downside in the absence of hurricanes with refiners running hard.
- Money managers decreased net length by 5k lots last week.
Propane
- Conway is trading at .7525 while Belvieu is trading at .7825.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7950.
- Conway Swap Oct24 indicative midpoint ~.7800
- Conway propane is trading at 40% to WTI.
Natural Gas
- Overnight weather runs removed 4 CDDs for the two-week forecast.
- Freeport LNG received its second tanker on Sunday as it continues its slow restart.
- Baker Hughes reported rig counts fell by 3 to 103 last week.
Continuous Daily WTI: WTI is challenging its 50-day moving average at $79.70 today. A close below would be a bearish technical indication and invite a challenge of the 200-day at $78.87.
