Outlook: Energies are strong out of the gate this morning on what’s expected to be a volatile week. The complex is finding support from several drivers with the primary headline being OPEC’s decision to delay its production increase. OPEC+ originally planned to increase production by 180,000 bpd in December as part of their broader plan to increase production by 2.2 mbpd through 2025 but has now delayed the start to January. The group cited lower prices and softer-than-expected demand as reasons for the delay with demand throughout Asia as the primary focus. LSEG Oil Research is estimating October arrivals at 26.74 mbpd vs 27.05 mbpd in September in Asia. The conflict in the Middle East continues to run hot with Iran expected to launch an attack following the US elections. The US has expressed concern to Iran that it may not be able to restrain Israel if the attacks continue. Lastly, the US dollar is sharply lower, trading down over 500 points this morning. Some of the weakness may be attributed to Harris leading polling in several swing states which could be causing some profit-taking in the Trump trade, according to Kenneth Broux, head of corporate research FX and rates at Societe Generale. Betting markets have converged over the weekend with lines falling closer to a coin flip.
Crude
- OPEC+ has officially agreed to delay its planned 180,000 bpd production increase in December by one month. (Reuters)
- OPEC+ still intends to gradually unwind 2.2 mbpd of production cuts through 2025. (Reuters)
- Iran warned over the weekend of a “crushing response” to Israel which is expected to come after the US elections on Tuesday. (WSJ)
- Axios is reporting that the Biden administration informed Iran that the US would not be able to restrain Israel if Iran chooses to launch another attack.
- Kazakhstan’s 400,000 bpd Kashagan field has been fully restored following maintenance. (BBG)
- Another tropical system has developed and is expected to enter the Gulf by the end of the week.
- Baker Hughes reported net oil rig counts fell by 1 to 479 last week.
- The US presidential election is on Tuesday while the FOMC meeting is on Thursday this week.
- As of 7:55 am CST: Brent crude oil up $1.82 to $74.92, US dollar index down $0.541 to 103.741 while the nearby e-mini S&P 500 futures contract is up 5.25 to 5764.00.
Diesel
- Russia’s October seaborne diesel and gasoil exports measured 2.6 MMT, lowest reading since September of 2023.
- Continuous HO is approaching its 100 DMA which sits at $2.3204.
- Nymex heating oil net length rose by 0.2k lots (-282 shorts, -83 longs) last week. (COT)
- Group diesel basis values continue to decline but remain in contango through December. We will roll out an inventory hedge recommendation when we see the right opportunity.
Gasoline
- Continuous RBOB is finding resistance at its 50 DMA near $2.0318.
- Nymex gasoline net length fell by 3.4k lots (+5,043 shorts, +1.655 longs) last week. (COT)
Propane
- Conway futures are trading at .7725 while Belvieu is trading at .8025.
- Conway Swap Q4-Q1 25/26 strip indicative midpoint ~.7675.
- Conway propane is trading at 42% to WTI.
Natural Gas
- Overnight weather runs removed 11 HDDs for the two-week forecast.
- The US National Weather Service forecasts the Eastern Seaboard a 50-60% probability of experiencing above average temps through mid-November.
- Baker Hughes reported nat gas rigs rose by 1 to 102 last week.
- Nymex natural gas net length fell by 0.8k lots (+6.9k shorts, +6.1k longs) last week. (COT)
Continuous Daily WTI: Strength continues across energies and WTI will look to close above its 50 DMA today which could be viewed as technically supportive.
