Outlook: The energy complex is looking to recoup some of the pullbacks following the EIA stats yesterday. Risk premium is still likely the predominant driver with Israel bombing Beirut again after soldiers were killed during their ground assault. Israel has said they will begin targeting Iran’s energy infrastructure but that has yet to be seen. OPEC does have the capacity to make up for any lost Iranian barrels however prices would still likely respond with a move higher. The largest upside risk remains the Strait of Hormuz which transits over 20% of global oil supply. Iran has not hinted toward playing that card yet, but prices could see a sharp response if they do. Lost in the scuffle are reports that Libya has lifted its force majeure on all its oilfields which should bring back over half a million barrels of supply. Output from the country has been held hostage due to political feuds regarding central bank control. Look for Middle East developments to continue to control the trend moving forward.
Crude
- Libya has lifted its force majeure at all oil fields today.
- Israel bombed Beirut in Lebanon overnight after eight of its soldiers were killed in southern Lebanon in fights with Hezbollah.
- Iran accounts for around 4% of global oil output, however, OPEC+ spare capacity may limit supply shortage concerns while global demand remains soft.
- OPEC+ made no adjustments to its production plan yesterday and intends to begin unwinding 180,000 bpd of cuts in December.
- Middle East risk premium is still building with Iran’s 1.7 million bpd of crude exports in focus.
- The EIA reported crude stocks rose 3.8 million barrels last week.
- Input to refiners fell 662,000 bpd last week while US production rose 100,000 bpd to support the unexpected build.
- Nonfarm payrolls will be reported tomorrow morning at 7:30 am CT.
- As of 8:26 am CST: Brent crude oil up $1.83 to $75.73, US dollar index up $0.204 to 101.880 while the nearby e-mini S&P 500 futures contract is down 15.25 to 5744.00.
Diesel
- The EIA reported diesel stocks fell 1.2 million barrels last week.
- 4-week average diesel demand fell 90,000 bpd to 3.7 mbpd last week.
- Continuous HO bounced off resistance at its 50-day moving average yesterday. The 50 DMA sits at $2.2464 today.
Gasoline
- The EIA reported gasoline stocks rose 1.1 million barrels last week.
- 4-week average gasoline demand fell 104,000 bpd to 8.7 mbpd.
Propane
- Conway is trading at .7350 while Belvieu is trading at .7675.
- Conway Swap Q4-Q1 25/26 strip indicative midpoint ~.7775.
- Conway propane is trading at 40% to WTI.
- The EIA reported a smaller than expected build in propane stocks of 263,000 bpd.
- Propane prices continue to draft support from the rally in crude.
Natural Gas
- Overnight weather runs removed 1 TDDs for the two-week forecast.
- Reuters estimates nat gas stocks rose between 60 and 65 Bcf last week.
- The EIA will report inventories at 9:30 am CT.
Oil At Risk: Israel has expressed intent to target Iran’s oil and gas infrastructure in retaliation to the attack earlier this week. Iran’s 1.7 mbpd of crude exports could be at risk, however, OPEC could quickly make up for losses due to spare capacity. If escalation results in Iran blocking the Strait of Hormuz, over 20 mbpd of oil could be disrupted which could swiftly cripple global oil supply.
