Outlook: The energy complex is finding strength this morning after China announced its largest stimulus package since the Covid-19 pandemic. The PBOC cut interest rates for several major benchmarks as it aims to hit its 5% annual growth rate and Asian stocks have rallied to 2.5-year highs. Sluggish Chinese demand has been a significant bearish driver across energies but another round of stimulus will act to ease fears of further downturn. Previous measures have struggled to produce economic momentum and traders will certainly be cautious with optimism. In the US, a tropical storm moving through the Caribbean is expected to become a major hurricane by Thursday. The current storm path remains east of the majority of offshore production, however severe weather outside the main cone still has the ability to disrupt production. De-escalatory comments from Iran will act as bearish opposition to Chinese stimulus and production risk and trading could remain choppy today.
Crude
- China announced a bucket of stimulus measures overnight, buoying broader markets including energies. (Reuters)
- Iran’s president announced yesterday that the country is willing to de-escalate tensions with Israel and is not looking to destabilize the region. (BBG)
- Shell and Chevron have begun evacuating non-essential personnel from several oil platforms in the Gulf as a precautionary measure for the storm entering the Gulf this week. (Reuters)
- The storm path is currently projected to miss the bulk of primary offshore production and refinery infrastructure.
- Reuters estimates crude stocks fell 1.2 million barrels last week.
- The API will report its inventory survey after 3:30 pm CT today.
- As of 8:03 am CST: Brent crude oil up $1.45 to $75.35, US dollar index down $0.133 to 100.718 while the nearby e-mini S&P 500 futures contract is up 6.25 to 5783.00.
Diesel
- Continuous HO continues to hold above its 9-day moving average which is supportive short-term.
- Reuters estimates diesel stocks fell 2.2 million barrels last week.
Gasoline
- Continuous RBOB continues to hold above its 9-day moving average which is supportive short-term.
- RBOB may be more susceptible to demand destruction as another major hurricane looks to make landfall this weekend.
- Reuters estimates gasoline stocks rose 200,000 barrels last week.
Propane
- Conway is trading at .6750 while Belvieu is trading at .6600.
- Conway Swap Q4-Q1 2025 strip indicative midpoint ~.7375.
- Conway propane is trading at 40% to WTI.
Natural Gas
- Overnight weather runs added 2 TDDs for the two-week forecast.
- Another storm developing with a track for the Gulf could impact natural gas production this week.
- Cove Point LNG terminal went offline on Friday for a 20-day scheduled maintenance. The facility has 800 mmcf/d of capacity.
- Reuters estimates nat gas stocks rose between 53 and 56 Bcf last week.
Continuous Daily HO: A failed test of the 9-day moving average yesterday shows support for the short-term uptrend. There’s room to run before a test of resistance at the 50-day moving average near $2.2868.
