Morning Highlights
Morning Highlights

10-2-24 Energies higher with eyes on Middle East...


Riley Schwieger

Oct 2, 2024

Outlook: The energy complex is firmly higher this morning as the Middle East remains in focus. Short-term momentum has been established with crude and diesel futures closing above trendline support to find technical backing. Israel’s response to Iran’s attack has suggested further escalation is ahead and that Iran’s oil and nuclear facilities may be a target. Iran accounts for roughly 4% of global oil production which ironically aligns with OPEC’s nameplate spare capacity which may reduce fears of any sustained deficits if portions get knocked offline. The Strait of Hormuz is where things could really escalate as the choke point accounts for over 25% of global oil trade. As it sits today, fundamentals have yet to be disrupted and the move higher is supported by risk premium. If Israel takes its time with retaliation, this premium could begin to work its way out of the market as prices hit technical resistance and traders take profits.

Crude

  • Iran said earlier today that its missile attack on Israel was over barring further provocation. Israel and the US have promised to strike back against Tehran.
  • Iran accounts for around 4% of global oil output, however, OPEC+ spare capacity may limit supply shortage concerns while global demand remains soft.
  • OPEC+ panel will meet virtually on October 2nd. No policy adjustments are expected to be made.
  • East Coast and Gulf Coast dockworkers have gone on strike following the expiration of the International Longshoremen’s Association union contract with the US Maritime Alliance. While the direct impact on energy is minimal, it has the potential to significantly impact GDP depending on duration.
  • Reuters estimates crude stocks fell 1.3 million barrels last week.
  • The API survey showed crude stocks fell by 1.5 million barrels last week.
  • US manufacturing data reflected further contraction for the month of September.
  • The EIA will report inventories at 9:30 am CT.
  • As of 7:55 am CST: Brent crude oil up $1.89 to $75.45, US dollar index up $0.284 to 101.478 while the nearby e-mini S&P 500 futures contract is down 7.25 to 5752.00.

Diesel

  • Reuters estimates diesel stocks fell 1.9 million barrels last week.
  • The API survey showed diesel stocks fell 2.7 million barrels last week.
  • Continuous HO closed above trendline resistance yesterday.

Gasoline

  • Reuters estimates gasoline stocks fell 70,000 barrels last week.
  • The API survey showed gasoline stocks rose 900,000 barrels last week.

Propane

  • Conway is trading at .7000 while Belvieu is trading at .7425.
  • Conway Swap Q4-Q1 25/26 strip indicative midpoint ~.7775.
  • Conway propane is trading at 40% to WTI.
  • OPIS estimates propane stocks rose 2.1 million barrels last week.  

Natural Gas

  • Overnight weather runs added 4 TDDs for the two-week forecast.
  • Nearly 2 million electricity customers remain without power across the Southeast due to flooding from Hurricane Helene.
  • Reuters estimates nat gas stocks rose between 60 and 65 Bcf last week.

Continuous Daily WTI: WTI is testing September highs and the 50-day moving average holds resistance right above it at $73.00.