Outlook: Energies have pulled off the morning highs following another disappointing payroll report today. The report was certainly more optimistic than the previous go around which showed growth of just 89k but there’s clear stress developing in the labor market which stokes economic downturn fears. Consensus that the Fed is behind the 8-ball is growing and rate-cut bets are now in favor of a 50 basis point cut in interest this month as opposed to 25 bps. Cuts aren’t necessarily expected to produce quick results in terms of recovery and it may be a bumpy road moving forward. On the supply side, OPEC+ has delayed its production increase till December and Kazakhstan has committed to slashing production in October to make up for overproduction. Libya has yet to announce an official resumption of full production with estimates still near 500,000 for offline capacity. There are two ways to view that, one being nearly 1 million bpd of oil is out of the market currently that could otherwise be there and is contributing to market tightness. Or two, this volume will be back in the market before any tightness can drive prices. The supply and demand dynamic is expected to remain fragile which could bring an uptick in volatility through the end of the year.
Crude
- OPEC announced they will delay their 180,000 bpd production increase from October to December.
- Kazakhstan reaffirmed plans to cut production by 265,000 bpd in October to compensate for overproduction in January.
- Bank of America lowered its 2025 Brent forecast from $80 to $75.
- Nonfarm payrolls were reported at 142k vs 160k est. Unemployment remained flat at 4.2%.
- The CME FedWatch tool is now showing a 50 basis point cut from the Fed as the favorite at 55% vs 45% for 25 bps.
- The EIA reported crude stocks fell 6.9 million barrels last week.
- Cushing stocks fell 1.1 million barrels to 26.4 million barrels.
- Baker Hughes will report rig counts at 12:00pm CT.
- As of 8:10 am CST: Brent crude oil up $0.26 to $72.95, US dollar index down $0.208 to 100.899 while the nearby e-mini S&P 500 futures contract is up 3.25 to 5515.00.
Diesel
- India’s August diesel sales were down 2.5% y/y. (Reuters)
- The EIA reported diesel stocks fell 400,000 barrels last week while expectations called for a build.
- For retailers, short positions are advised to be covered at these price points, however holding excess length is not advised until we see a more compelling short-term trend change.
Gasoline
- India’s August gasoline sales were 8.6% higher y/y. (Reuters)
- The EIA reported gasoline stocks rose 800,000 barrels last week while expectations called for a draw.
Propane
- Conway is trading at .6825 while Belvieu is trading at .6950.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7325.
- Conway Swap Oct24 indicative midpoint ~.7050.
- Conway propane is trading at 43% to WTI.
- The EIA reported a larger than expected build of 2.6 million barrels for propane last week.
- Spot propane values have breached 70c with pressure in the crude space spilling over.
Natural Gas
- Overnight weather runs added 4 CDDs for the two-week forecast.
- The EIA reported natural gas stocks rose 13 Bcf last week.
- The 5-year average injection for last week is 51 Bcf.
- The US Mountain Region saw natural gas stocks hit record levels at 270 Bcf last week, which is 41% above 5-year average levels.
Continuous Daily WTI: Crude looks to challenge $70 to finish the week but failure could leave room for further downside to testing December lows.
