Outlook: Geopolitical fears have come roaring back today allowing for a strong move higher in energies. Reports of an Israeli strike killing Hamas’ political leader Ismail Haniyeh in Iran’s capital along with the US striking Iraq are the key drivers this morning. The geopolitical escalation is overshadowing another round of disappointing data from China’s manufacturing sector released overnight. The fundamentals are also supporting the bullish surge today with industry estimates for US inventories expecting draws last week. The API survey is seeing another big draw in crude of over 4 million barrels while Reuters expects a smaller draw of 1.1 million barrels. The Fed meeting today will kick off a jam-packed macroeconomic slate for the rest of the week which may weigh on prices. The overwhelming expectation is that interest rates will remain unchanged today but this streak is expected to change in September with 87% of bets calling for a 25bp cut. Rhetoric in the press conference to follow will be more closely tracked looking for indications on cuts through the end of the year.
Crude
- Reports that Israel killed Hamas’ political leader in an airstrike on Iran’s capital have stoked risk-on buying today.
- The US carried out a strike in Iraq yesterday, described as self-defense by US officials.
- China’s manufacturing activity shrank for a third month in July, per their factory survey released last night.
- A Reuters poll estimates WTI to average $79.22 in 2024, down from $79.72 in the June poll.
- The API survey showed crude stocks fell 4.5 million barrels last week.
- Reuters estimates crude stocks fell 1.1 million barrels last week.
- The EIA will report inventories at 9:30am CT.
- The Fed is expected to leave interest rates unchanged today.
- OPEC+ is expected to leave output policies unchanged when it meets tomorrow. OPEC+ is currently cutting 5.8 mbpd which is ~5.7% of global demand. (Reuters)
- As of 8:00 am CST: Brent crude oil up $2.30 to $80.93, US dollar index down $0.545 to 104.009 while the nearby e-mini S&P 500 futures contract is up 58.25 to 5541.00.
Diesel
- The API survey showed diesel stocks fell 300,000 barrels last week.
- Reuters estimates diesel stocks fell 1.2 million barrels last week.
- Today is LTD for August HO.
Gasoline
- The API survey showed gasoline stocks fell 1.9 million barrels last week.
- Reuters estimates gasoline stocks fell 1 million barrels last week.
- Today is LTD for August RBOB.
Propane
- Conway is trading at .7250 while Belvieu is trading at .7625.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7675.
- Conway Swap Oct24 indicative midpoint ~.7550
- Conway propane is trading at 40% to WTI.
- Expect propane values to be 1-2 cents higher out of the gate following crude today.
Natural Gas
- Overnight weather runs removed 10 CDDs for the two-week forecast.
- Freeport LNG has resumed pull operation on all three trains yesterday.
- Reuters estimates nat gas stocks rose between 27 and 45 Bcf last week.
Continuous Daily WTI: Look for the 9-day moving average to be a target through the end of the week if crude wants to regain short-term bullish momentum.
