Outlook: The energy complex is lower this morning while the US dollar and equities scream higher. Donald Trump was announced as the winner of the presidential election last night and we are likely seeing the market adjust to a shifting political landscape. A Trump presidency could put bearish pressure on the energy sector if a stronger tariff approach toward China comes to fruition. China, which is the world’s top crude importer, has struggled to return to growth levels seen prior to the pandemic despite numerous stimulus efforts. Further headwinds in China could spill over to the broader global economy. This forecast remains only speculation and there is no guarantee that this is the path the new administration will take. It’s important to remember that there are many moving pieces that impact not only energies but commodities as a whole. The geopolitical landscape remains fragile, a hurricane is entering the Gulf, and an OPEC meeting looms, which could all send ripples through the market if the right domino falls.
Crude
- Republican Donald Trump has won the US presidential election. Inauguration day is set for January 20th.
- The US dollar is seeing its largest one-day rise since March 2020.
- Russian Deputy Prime Minister Alexander Novak confirmed today that Russia is producing 9 mbpd of crude, which aligns with their OPEC+ commitments. (BBG)
- Oil and gas producers in the Gulf have already begun shutting down platforms with Tropical Storm Rafael expected to enter the Gulf as a category 1 hurricane.
- The API survey showed crude stocks rose 3.1 million barrels last week.
- Reuters estimates crude stocks rose 1.1 million barrels last week.
- The EIA will report inventories at 9:30 am CT.
- The Fed will meet on Thursday this week and is expected to cut interest rates by 25 bps. Confidence for another cut in December has slipped following the election.
- As of 7:41 am CST: Brent crude oil down $2.03 to $73.50, US dollar index up $1.860 to 105.281 while the nearby e-mini S&P 500 futures contract is up 128.25 to 5940.00.
Diesel
- The API survey showed diesel stocks rose 852,000 barrels last week.
- Reuters estimates diesel stocks fell 1.1 million barrels last week.
- Nearby support for HO may be found at the 50 DMA near $2.1988 which a breach opening the door to the October low near $2.10.
- 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
- The API survey showed gasoline stocks rose 928,000 barrels last week.
- Reuters estimates gasoline stocks fell 0.9 million barrels last week.
- Continuous RBOB has trendline support near $1.9350.
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 have remained relatively idle this week however the front end of the curve could face pressure is exports are impacted by the hurricane entering the Gulf.
Natural Gas
- Overnight weather runs removed 2 HDDs for the two-week forecast.
- Reuters estimates nat gas stocks rose between 38-76 Bcf last week.
- 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.
US Dollar: The US dollar is seeing its largest one-day rise since March 2020 in reaction to the presidential election. The US 30-year yield rose as much as 23 bps this morning which is also the largest daily increase since 2020.
