Outlook: Crude and refined products are mixed this morning while crack spreads continue to find support ahead of the impending hurricane. Francine is expected to strengthen to a category 1 hurricane and has the potential to strength to a category 2 before making landfall later this week. OPEC released its monthly report this morning which revealed lower revisions for 2024 and 2025 oil demand and a decline in crude production due to Libya’s outages. OPEC remains the most bullish looking ahead for global oil demand and still projects over 2 mbpd of growth. This is roughly double the estimates provided by the EIA and IEA. China continues to be the catalyst for demand growth and an uptick in crude imports to reach yearly highs is providing some optimism. Positive sentiment may be capped due to expectations for refilling strategic reserves rather than domestic demand growth to stoke the purchasing. The API will release its survey on US inventories for last week this afternoon after 3:30 pm CT and the EIA will report its data at 9:30 am CT tomorrow. US inflation is expected to have fallen from 2.9% to 2.6% last month with the official print due for release at 7:30 am CT tomorrow morning.
Crude
- OPEC released its monthly report this morning which revealed cuts to both 2024 and 2025 oil demand growth. Growth estimates fell 40 kbpd for 2025 and 80 kbpd for 2024.
- OPEC cited its crude production at 26.59 mbpd in August, down 197,000 bpd from July with production declines led by Libya.
- Several large producers in the Gulf have evacuated workers and suspended drilling activity in preparation for Hurricane Francine. Bloomberg estimates 125k bpd of production is in the current storm path.
- China’s daily crude imports in august rose to their highest level since August 2023. (Reuters)
- Goldman Sachs expects Brent crude to average $77 in Q4.
- The US DOE announced yesterday that it purchased 3.4 million barrels for the SPR for Q1. The DOE has purchased roughly 50 mb at an average price of $76. (BBG)
- Reuters estimates crude stocks rose by 800,000 barrels last week.
- US August CPI will be reported on Wednesday.
- As of 8:08 am CST: Brent crude oil down $0.48 to $71.37, US dollar index up $0.070 to 101.625 while the nearby e-mini S&P 500 futures contract is up 17.25 to 5496.00.
Diesel
- According to Platts, roughly 5.8 mbpd of refining capacity could be impacted by the hurricane this week.
- China’s LNG powered trucks account for 33% of new trucks sold in the country and displaced 280,000 bpd of diesel demand in 2024. (Reuters)
- Reuters estimates diesel stocks rose 300,000 barrels last week.
- 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
- Reuters estimates gasoline stocks fell 400,000 barrels last week.
- China’s growth in EVs along with LNG powered vehicles is expected to stunt China’s gasoline demand over the next several years. (Reuters)
Propane
- Conway is trading at .6450 while Belvieu is trading at .6350.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.6900.
- Conway Swap Oct24 indicative midpoint ~.6625.
- Conway propane is trading at 43% to WTI.
Natural Gas
- Overnight weather runs removed 4 CDDs for the two-week forecast.
- Bloomberg estimates 300 mmcf/d of gas production is at risk within the hurricane’s current path. A shut-in of exports, however, could overpower production losses.
- Reuters estimates nat gas stocks rose between 49 and 68 Bcf last week.
Hurricane Watch: While crude platforms have already begun evacuation, attention will shift to the severity of the storm and whether it packs enough punch to interrupt refinery flows as it works inland.
