Outlook: The energy complex looking for positive momentum to start the week, drafting support from a tropical storm expected to develop into a hurricane and impact the Gulf by Thursday. The storm poses a risk to offshore crude and natural gas production along with refineries near the coast. Freeport LNG has been the most vulnerable after being shut in due to a storm earlier in the season. Crack spreads are finding marginal strength this morning as the storm path gets digested. The broader bearish drivers that have controlled the trend since July remain persistent and may provide a swift headwind to any rallies. Sentiment from the APPEC conference in Singapore has been said to be overwhelmingly bearish but traders have shed caution on becoming convincingly short. Banks and agencies have been actively reducing price forecasts the last several weeks with demand continuing to underperform, primarily in China. Traders should have plenty of fresh information this week to firm up direction with monthly fundamental reports starting tomorrow and US August CPI due out Wednesday.
Crude
- A tropical storm has developed in the Gulf and is tracking to make landfall in Louisiana Thursday morning. The storm is expected to become a hurricane before making landfall.
- Nymex WTI net length has fallen to a 17-month low with a decrease of 109.6k contracts last week. (COT)
- Day one of the APPEC conference in Singapore was said to be overwhelmingly bearish for oil with Trafigura saying prices are poised to visit the $60s. (BBG)
- Morgan Stanley cut its Q4 2024 oil price forecast to $75 from $80.
- Saudi Aramco cut oil prices to Asia which can be a signal of softening demand. (BBG)
- Baker Hughes reported US rig counts remained flat at 483 last week.
- OPEC will release its monthly report tomorrow night.
- US August CPI will be reported on Wednesday.
- As of 8:13 am CST: Brent crude oil up $0.36 to $71.42, US dollar index up $0.419 to 101.596 while the nearby e-mini S&P 500 futures contract is up 37.25 to 5457.00.
Diesel
- Managed money participants decreased heating oil net length by 3.9k lots last week.
- Continuous HO closed at its lowest level since December 2021 on Friday.
- 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
- Vitol sees China’s gasoline demand peaking either this year or next due to the ongoing energy transition.
- Managed money participants decreased gasoline net length by 1k lots last week.
Propane
- Conway is trading at .6725 while Belvieu is trading at .6650.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7100.
- Conway Swap Oct24 indicative midpoint ~.6825.
- Conway propane is trading at 43% to WTI.
Natural Gas
- Overnight weather runs removed 4 CDDs for the two-week forecast.
- All eyes are on Freeport LNG with another potential hurricane putting the facility's operations at risk.
- Baker Hughes reported nat gas rigs fell by 1 to 94 last week.
Continuous Weekly HO: Continuous HO is pushing into 2021 lows after falling to its lowest level since December of 2021 on Friday.
