Outlook: Energies are drafting support today as supply outages linger through the weekend. Gulf production has seen a slow recovery while 20% of crude production remains offline following Hurricane Francine. Libya’s crude production and exports continue to fall with officials unable to reach a deal regarding central bank control for the country. Libya’s exports have fallen nearly 800,000 bpd since the conflict arose at the beginning of the month. WTI backwardation is expanding again this morning as it tests $1.00, reflecting the tighter fundamentals. WTI’s long/short ratio fell to 2.44/1, which is the lowest level since January, and may add a repositioning tailwind if commodities become a buy as the Fed cuts interest rates. Rate cut bets have been swinging between 25 and 50 but as of this morning, 65% of bets fall in favor of a 50 basis point cut for Wednesday’s Fed meeting. October WTI is again challenging resistance at $70 and a close above may be viewed at technically supportive to kick the week off.
Crude
- 20% of Gulf crude production remains offline in the aftermath of Hurricane Francine.
- UN-led talks in Libya failed to resolve the dispute over control of the central bank while oil exports have now fallen to 314,000 bpd.
- Chinese oil stocks rose by 1.85 mbpd in August, marking the largest growth in 14 months. (Reuters)
- Money managers flipped overall positioning in Brent crude to net short for the first time on record last week. (COT)
- Industrial output in China slowed to a five-month low in August while retail sales and new home prices also softened. (Reuters)
- Baker Hughes report net oil rig counts rose by 5 to 488. This was the first addition in 5 weeks.
- The Fed is expected to announce its first interest rate cut on Wednesday
- As of 8:35 am CST: Brent crude oil up $1.32 to $72.90, US dollar index down $0.435 to 100.679 while the nearby e-mini S&P 500 futures contract is down 10.25 to 5619.00.
Diesel
- Managed money Nymex heating oil net shorts rose by 15k lots to 39k last week, biggest since 2015. (COT)
- 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
- Managed money Nymex RBOB net longs fell by 11k to 5k last week, smallest since July 2017.
- European refinery run cuts are estimated to reach 300,000 bpd this month and 700,000 bpd in Q4, according to Energy Aspects.
- European gasoline exports are expected to drop to 190,000 bpd in Q4.
Propane
- Conway is trading at .6450 while Belvieu is trading at .6300.
- Conway Swap Q4-Q1 2025 strip indicative midpoint ~.7100.
- Conway propane is trading at 43% to WTI.
Natural Gas
- Overnight weather runs added 2 HDDs for the two-week forecast.
- Baker Hughes reported nat gas rigs rose by 3 to 97 last week.
- European nat gas storage was reported 93.3% full which is 6% above 5-year average levels. (BBG)
Managed Money: With net positions being stretched to historically short levels, selling pressure may ease in the absence of a fresh bearish driver.
