Outlook: The energy complex is on track for weekly gains despite a softer tone early this morning. Chinese CPI prints overnight were relatively supportive but broader concerns of sluggish recovery remain intact. Geopolitical concerns could provoke risk on buying ahead of the weekend in anticipation of the Iranian retaliation, however, this premium may have already been established incrementally throughout the week. The market will likely be sensitive to any reports suggesting the timing or scale of the assault before the bell today. Recessionary fears and geopolitical risk are expected to remain key drivers in opposition near-term.
Crude
- Crude futures are on track for a weekly gain, ending a 4-week streak of declines.
- Geopolitical risk, a slight reduction in economic fears, and tightening global fundamentals provided bullish sentiment this week.
- Israel launched an airstrike on the Gaza strip that killed at least 40 yesterday.
- Libya’s Sharara oilfield remains offline due to protests.
- The prompt crude spread has expanded nearly 25 cents this week.
- China’s CPI prints all beat expectations overnight which is viewed as positive for economic growth.
- Baker Hughes will report rig counts at 12:00 pm CT.
- As of 8:51 am CST: Brent crude oil down $0.22 to $78.94, US dollar index down $0.040 to 103.169 while the nearby e-mini S&P 500 futures contract is down 16.25 to 5332.00.
Diesel
- An expected decline in refinery utilization from both planned and unplanned outages could support basis values through the end of Q3.
- Marathon said it will operate refiners at 90% capacity in Q3, down from 97% in Q2.
Gasoline
- An unplanned outage at the Delek refinery in El Dorado, Arkansas has supported Group 3 gasoline prices this week.
- AAA reports the national average retail gas price at $3.454, down 3 cents from last week.
Propane
- Conway is trading at .7425 while Belvieu is trading at .7575.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7875.
- Conway Swap Oct24 indicative midpoint ~.7725
- Conway propane is trading at 41% to WTI.
- The EIA reported propane stocks rose less than expected at 515,000 barrels last week. Midwest stocks saw a surprise draw.
Natural Gas
- Overnight weather runs removed 5 CDDs for the two-week forecast.
- Expanding export capacity through the end of the year could support gas prices in the absence of weather related disruptions.
- The EIA reported nat gas stocks rose 21 Bcf last week.
Managed Money: Fund managers have cut their combined position in the six most important petroleum futures and options contracts to just 262 million barrels. This is the 4th percentile for all weeks since 2013 for this time period. Funds have cut net length for four consecutive weeks driven by the deteriorating economic outlook (Reuters).
