Outlook: Energies are trading higher this morning, which is the fourth straight day of gains for WTI crude futures. Support remains from last week’s U.S. jobs data falling more than expected, which eased some recessionary fears. There is still geopolitical risk baked into the market as the world waits for Iran and Hezbollah to retaliate on Israel’s assassination of key leaders. The current belief is no longer a matter of if, but when a response will occur. Leaders from the U.S., Egypt, and Qatar started a new round of Gaza ceasefire talks between Israel and Hamas slated for August 15. As of this morning, Hamas is not expected to attend the negotiations.
OPEC released its monthly report this morning and cut its global demand growth forecast for the remainder of the year and next year on softer demand in China. The group expects world oil demand will rise by 2.11 million bpd in 2024, lower than their projected growth of 2.25 million bpd reported last month. Demand expectations for 2025 were also slashed from 1.85 million bpd to 1.78 million bpd. Even with the estimated reductions, OPEC remains at the top end of industry estimates. The IEA releases their newest Oil Market Report tomorrow where we will see if they make any adjustments to last month’s projection of 970,000 bpd of global oil growth in 2024.
U.S. oil refiners plan to reduce output during the third quarter due to weaker refining margins and lower earnings in the second quarter. Refinery utilization typically dips in the fall after the summer driving season. However, this year’s maintenance schedule is projected to be heavier than usual due to the lower refining margins. Marathon Petroleum plans to reduce its capacity utilization rate to 90% at all 13 refineries, down from 97% in the second quarter (BBG). PDF Energy is anticipating it will cut its processing rate to the lowest in three years. Valero Energy will reduce its operating rate from 3 million bpd to 2.86 million bpd, the lowest processing rate in two years. Phillips 66 is planning to cut processing rates to the low 90s, down from 98% in the second quarter, the highest level in five years.
- Money managers are net-short 153K futures and options across 20 raw-material markets, including crude and gas, the most since Bloomberg began measuring data in 2011.
- Managed money WTI crude net length decreased by 26.6k lots, driven by an increase in short positions (+16.7k lots) and a decrease in longs (-9.9k lots). GS
- Managed money Brent crude net length decreased by 56.2k lots, driven by a decrease in long positions (-37.9k lots) and an increase in short positions (+18.3K lots). GS
- Oil in floating storage rose 12% to 66.11 million barrels as of August 9, a sign of weak demand.
- As of 8:15 am CST: Brent crude oil up $0.90 to $80.56, US dollar index up $0.103 to 103.060 while the nearby e-mini S&P 500 futures contract is up 10.25 at 5380.50.
Diesel
- NYMEX heating oil net length decreased by 8.9k lots, including +2,451 new longs and +11,348 new shorts.
- Heat crack spread below $22, near the lowest level since January 2022.
- Distillate demand 9% below the five-year seasonal average at the bottom of the range.
Gasoline
- NYMEX gasoline net length decreased by 5.5k lots, including -3,225 new longs and +2,240 new shorts.
- Gasoline crack spread hovering near $24.
- Gasoline demand 1% below the five-year season average.
Propane
- Conway is trading at .7425 while Belvieu is trading at .7725.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7750.
- Conway propane is trading at 39% to WTI.
Natural Gas
- Managed money participants increased their NYMEX natural gas net length by 1.0k lots, including an increase in long positions of +1.9k and an increase in short positions of 0.9k lots.
- The natural gas rig count is lower by 3 rigs month-over-month and lower by 26 rigs year-over-year.
- Weekend weather runs came in largely unchanged, removing 0.5 CDDs from the two-week forecast, equivalent to a 1.4 Bcf decline in net implied demand. GS
