Outlook: The energy market is moving convincingly lower as bearish market drivers pile up. The lower trend continued early this morning driven by disappointing data flowing out of China, including poor manufacturing, poor export orders, and slow new homes growth. The losses have now been extended with a fresh report that Libya will return to full crude production which could return over 500,000 bpd of oil to the market. Fears of oversupply are beginning to mount and may be reinforced if OPEC+ moves forward with unwinding production cuts starting in October. Continuous WTI prices have fallen to their lowest level since mid-January while refined products are seeing lows stretching beyond this year. The conflict in the Middle East has become an afterthought for bullish considerations in the absence of a strong Iranian response and ongoing attacks in the Red Sea have yet to noticeably impact supply in a weaker demand environment.
Crude
- Six OPEC+ delegates told Reuters that OPEC+ will likely increase production by 180,000 bpd in October as part of the plan to unwind the 2.2 mbpd layer of cuts.
- Libya’s central banker Al-Kabir expects a deal to restart oil production soon.
- Russia’s seaborne crude exports fell to their lowest levels in a month with four-week averages hitting 3.16 mbpd last week.
- China reported weaker than expected manufacturing PMI over the weekend.
- China’s new export orders fell for the first time in eight months in July while new homes in August rose at their weakest pace this year. (Reuters)
- 3 potential tropical disturbances have developed in the Atlantic.
- Baker Hughes reported US crude rigs remained flat last week.
- US Manufacturing data will be reported at 9:00 am CT today.
- As of 8:46 am CST: Brent crude oil down $3.22 to $74.30, US dollar index down $0.046 to 101.606 while the nearby e-mini S&P 500 futures contract is down 43.25 to 5624.00.
Diesel
- A fire was reported at the Lyondell Basell refinery last week which may move up the scheduled close date from Spring.
- Refinery offline capacity is expected to fall to 263,000 bpd this week, down from 425,000 bpd last week. (Reuters)
- Managed money participants increased HO net length by 4.5k lots last week.
Gasoline
- Nigeria’s 650,000 bpd Dangote Refinery has started production of gasoline after activating its reformer unit with half of capacity expected to be delegated to gasoline.
- Managed money participants increased gasoline net length by 711 lots last week.
Propane
- Conway is trading at .7275 while Belvieu is trading at .7550.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7700.
- Conway Swap Oct24 indicative midpoint ~.7475.
- Conway propane is trading at 42% to WTI.
- Propane values will be looking to test support with crude moving sharply lower today.
Natural Gas
- Overnight weather runs removed 2 CDDs for the two-week forecast.
- Freeport LNG returned to service on Friday after an unplanned outage earlier in the week.
- Baker Hughes report nat gas rigs fell by 2 to 95 last week.
Continuous Daily WTI: A test of $70 appears imminent for crude futures if bearish momentum persists this week.
