Outlook: The energy complex is under heavy pressure as it looks to finish the week the way it started. Geopolitical fears have quickly eased with participants growing less and less sensitive to non-supply disruptive escalations in the Middle East. A stretch of bearish economic data out of China this week is also providing headwinds. Employment data in the US proved disappointing with nonfarm payrolls and unemployment reflecting a softening labor market. The US dollar is has tumbled 1000 points and the S&P and DJIA are down over 1% following the reports. As for fundamentals, OPEC overproduced relative to quotas again in June. According to the Reuters survey, Iraq remains the main culprit, overproducing by 161,000 bpd. A tropical system is gaining confidence with a path aimed toward the eastern Gulf. This system will be worth keeping track of over the weekend in the event that a tropical storm develops, strengthens, or shifts west toward more energy infrastructure.
Crude
- Despite the mid-week rally, oil is on track for its fourth consecutive weekly loss.
- OPEC reiterated its plan to boost production by 540,000 bpd in Q4 yesterday while leaving current policies unchanged. (BBG)
- Russia has reduced drilling activity by 2.5% y/y in the first half of 2024 as it aims to remain compliant with OPEC+ quotas.
- Exxon sees oil demand holding steady at 100 mbpd by 2050.
- NOAA is showing a great than 60% chance of a tropical disturbance developing over the next 7 days with a target on the panhandle of Florida.
- Continuous WTI is on track to close below its 200-week moving average today.
- Nonfarm Payrolls for July were reported at 114k vs 175k est.
- Unemployment rose to 4.3% vs 4.1% est.
- Baker Hughes will report rig counts at 12:00 pm CT.
- As of 8:45 am CST: Brent crude oil down $1.95 to $77.50, US dollar index down $1.009 to 103.413 while the nearby e-mini S&P 500 futures contract is down 75.25 to 5405.00.
Diesel
- China’s diesel demand is expected to fall ~2% in 2H24 to 3.93 mbpd. (Reuters)
- Valero’s Mackee, Texas 195,000 bpd refinery announced a planned shutdown yesterday.
Gasoline
- China’s gasoline demand is expected to grow annually by 1.2% despite diesel declines. (Reuters)
- Continuous RBOB is on track to close below its 200-day moving average today.
- The EPA issued an emergancy RVP waiver for Illinois, Indiana, Michigan, and Wisconsin to provide relief in the wake of recent refinery issues in the Chicago market.
Propane
- Conway is trading at .7200 while Belvieu is trading at .7575.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7675.
- Conway Swap Oct24 indicative midpoint ~.7500
- Conway propane is trading at 40% to WTI.
Natural Gas
- Overnight weather runs added 1 CDDs for the two-week forecast.
- The EIA reported natural gas stocks rose 18 Bcf last week. At 3,249 Bcf, inventories are 252 Bcf higher than last year and 441 Bcf above 5-year average levels.
- Dutch TTF is on track to close 12% higher for the week.
Continuous Daily HO: Diesel found resistance at its middle Bollinger and remains in the lower channel keeping the bearish trend intact.
