Outlook: The energy complex is finding strength again today despite lower trade volumes ahead of US elections today. A combination of geopolitical risk premium, delayed OPEC+ production increases, and another potential hurricane tracking for the Gulf are providing a consistent tailwind this week. Tropical Storm Rafael is expected to enter the Gulf as a Hurricane before weakening back to a tropical storm but up to 4.9 mbpd of crude production sits within the projected storm path according to Reuters. Bearish elements still linger with forecasts that global diesel demand may see its largest yearly decline in 2025 since 2016 aside from the pandemic. Along with China, India is also showing signs of slowing fuel demand which may grab more attention if the trend persists. In the US, the API will report its inventory survey this afternoon after 3:30 while the EIA will report their data tomorrow morning at 9:30 am CT. The US Presidential Election will remain the priority this week as traders await the results.
Crude
- Iran announced plans to increase output by 250,000 bpd yesterday. (Reuters)
- Russia’s seaborne crude exports fell 530,000 bpd last week to 3.02 mbpd, the biggest decline since early July.
- The Canadian government proposed draft regulations on Monday that would require oil and gas producers to cut emissions by 35% below 2019 levels by 2030.
- Early evacuations on offshore oil and gas platforms have already begun in anticipation of Tropical Storm Rafael.
- WTI’s call skew has again expanded to its most bullish since October 11th.
- The US presidential election is on Tuesday while the FOMC meeting is on Thursday this week.
- The API will report its inventory survey this afternoon after 3:30 pm CT.
- Reuters estimates crude stocks rose 1.8 million barrels last week.
- As of 8:37 am CST: Brent crude oil up $0.74 to $75.82, US dollar index down $0.267 to 103.618 while the nearby e-mini S&P 500 futures contract is up 25.25 to 5767.00.
Diesel
- The IEA expects global gasoil demand to fall by 258,000 bpd next year, which is the biggest drop since 2016 aside from the pandemic. (BBG)
- In the first 10 months of 2024, diesel sales in India expanded by just 1.8%, which was the slowest pace since 2020.
- Reuters estimates diesel stocks fell 1.5 million barrels last week.
- 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.
- Forward basis values may look favorable for those looking to establish basis length ahead of end user contracting interest.
Gasoline
- Continuous RBOB is again testing resistance at its 50 DMA near $2.0269
- November RBOB could find resistance at its 100 DMA near $2.0540.
- Reuters estimates gasoline stocks fell 1.7 million barrels last week.
Propane
- Conway futures are trading at .7650 while Belvieu is trading at .8125.
- Conway Swap Q4-Q1 25/26 strip indicative midpoint ~.7650.
- Conway propane is trading at 42% to WTI.
- Propane markets were quieter yesterday and resisted the upside seen across energies.
Natural Gas
- Overnight weather runs added 3 HDDs for the two-week forecast.
- Temperatures through mid-November are expected to be warmer than the 10-year average.
- Tropical storm Rafael’s effect on natural gas prices can be complicated due to the ability to knock off offshore production but also shut-in exports. Freeport LNG partially shut down earlier this year due a storm.
Global Gasoil Demand:
