Outlook: Crude oil gapped lower at the open last night and is seeing an extension of losses this morning, trading down over $4. Israel launched retaliatory strikes against Iran on Friday night/Saturday morning and the attack focused primarily on military targets. Israel’s attacks targeted Iranian defense systems and missile production facilities. There is mixed reporting on whether Iran will retaliate but the overarching sentiment following the long-awaited attack leaned bearish with energy and nuclear infrastructure left uninterrupted. Ceasefire progress could get a lot of chatter this week as officials look for clarity on where each side stands in the aftermath of the weekend attack. Any hint toward progress of a deal could put further pressure on the complex, which still trades above both October and September lows. US elections are right around the corner along with an important production decision from OPEC set for December 1st.
Crude
- Oil prices are moving sharply lower after Israel’s retaliatory strike against Iran bypassed oil and nuclear facilities. (Reuters)
- WTI futures gapped lower at the open and have posted a low of $67.14 today.
- Citi lowered its Brent price target for the next three months to $70 from $74.
- OPEC’s upcoming decision on unwinding production cuts may shift in focus if the geopolitical cools. The group will meet on December 1st.
- Chinese imports of Iranian oil are on track to hit 2 mbpd this month, according to Kpler. This would be a 250,000 bpd increase m/m.
- WTI net-long positions are on their longest run of declines since May, with outright longs falling to their lowest since 2010. (BBG,COT)
- Global crude in floating storage fell 18% last week to 55.49 million barrels. (BBG, Vortexa)
- As of 7:35 am CST: Brent crude oil down $4.48 to $71.57, US dollar index down $0.104 to 104.153 while the nearby e-mini S&P 500 futures contract is up 28.25 to 5874.00.
Diesel
- Prompt diesel futures are off over 4% as risk premium exits the market this morning.
- Nymex heating oil net length fell by 3.5K lots last week, (+6.9k shorts, +3.4k longs). (COT)
- The September low for continuous HO is $2.0431
Gasoline
- Gasoline losses this morning outpace diesel, trading down over 5%.
- Nymex gasoline open interest rose to its highest level since August last week. (COT)
- Nymex gasoline net length remained near unchanged last week. (COT)
- The September low for continuous RBOB is $1.8545.
Propane
- Conway futures are trading at .7475 while Belvieu is trading at .8050.
- Conway Swap Q4-Q1 25/26 strip indicative midpoint ~.7500.
- Conway propane is trading at 42% to WTI.
Natural Gas
- Overnight weather runs removed 2 HDDs for the two-week forecast.
- The two-week forecasts continues to show conditions warmer than the 10-year average.
- Baker Hughes reported nat gas rigs rose by 2 to 101 last week.
- Dutch TTF is down over 3% this morning in reaction to Middle East developments.
Continuous Daily WTI: WTI’s gap lower will create an upside target if energies find firm ground to stand on. A break of trendline support, along with several other technicals could suggest further downside. The September low is a key area of support.
