Morning Highlights
Morning Highlights

10-4-24 Energies hold strength ahead of the weekend...


Riley Schwieger

Oct 4, 2024

Outlook: Momentum continues in energies which are pressing fresh weekly highs to end the week. The market has been jolted by the escalations in the Middle East this week and fear continues to mount that Iran’s energy infrastructure may be targeted. Israel bombed several locations in Beirut last night as they continue to target Hezbollah leadership. Outside of geopolitical risk, the macros have also lent support today after nonfarm payrolls were reported much larger than expected. Positive data in the employment sector should provide the Fed comfort that their action in cutting rates is timely and on track for a soft landing. Rate cut bets have shifted heavily in favor of a 25-basis point cut in November following the reports this morning. Risk-on sentiment may support the market ahead of the weekend as traders look to hold length in anticipation of a larger Israeli attack. Profit-taking remains a downside risk with a ~10% rally in the pocket.

Crude

  • Last night, Israel bombed over a dozen Hezbollah targets in Beirut.
  • Three sources told Reuters yesterday that Ministers from Gulf Arab states and Iran discussed the de-escalation of conflicts between Israel and Iran at a meeting of Asian nations hosted by Qatar.
  • OPEC+ monthly output fell 390,000 bpd to 26.14 mbpd in September, led by Libya whose production was down 300,000 bpd. (Reuters)
  • Crude imports to Asia were reported at 27.05 mbpd in September while YTD imports were reported at 26.7 mbpd, 200,000 bpd lower than year ago levels.
  • Nonfarm payrolls were reported at 254k for Sep vs 140k est.
  • US unemployment was reported at 4.1% vs 4.2%
  • As of 8:26 am CST: Brent crude oil up $0.65 to $78.27, US dollar index up $0.504 to 102.487 while the nearby e-mini S&P 500 futures contract is up 44.25 to 5793.00.

Diesel

  • Continuous HO closed above its 50-day moving average yesterday.
  • HO closed above its upper Bollinger band which can be an overbought indication.

Gasoline

  • Continuous RBOB’s 50-day moving average sits at $2.1590 which could provide resistance if momentum persists.
  • Prompt RBOB trades at a 21-cent discount to diesel.
  • AAA reports the national average gas price at $3.18, down 4 cents from last week.

Propane

  • Conway is trading at .7750 while Belvieu is trading at .8200.
  • 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 added 1 TDDs for the two-week forecast.
  • The EIA reported nat gas stocks rose 55 Bcf last week.
  • Natural gas inventories have normalized quickly and are only 190 Bcf higher than 5-year average levels of 3,357 Bcf.
  • Natural gas is finding resistance at $3.00 for the second time this week.

Continuous Daily HO: Diesel is finding strength today and may look to test its 100-day moving average at $2.3561. Diesel hasn’t traded above its 100-day since early July.