Outlook: The energy complex is lower again this morning which has been a trend this week but not necessarily an accurate indication of where markets will finish with what has been a choppy week. A lesser impact from Hurricane Rafael and another round of disappointing stimulus out of China could be providing bearish pressure today. With another month passing reflecting lower y/y Chinese crude imports, traders may be looking for more aggressive stimulus packages for demand to get back on track. Trump has begun to speak on some of his first orders when he steps back into office. The WSJ is reporting that Trump plans to drastically increase sanctions on Iran and throttle its oil sales as part of an aggressive strategy to undercut Tehran’s support in the Middle East and its nuclear program. Iran has successfully built a ghost fleet which has allowed crude exports to flourish despite ongoing sanctions. While the report could be viewed as bullish face-on, OPEC+ is standing at the ready to increase production which could quickly fill in for lost barrels if sanctions were to succeed.
Crude
- China announced a 10 trillion-yuan program to refinance local government debt today as it continues to try to push its economy towards its growth target.
- Chinese equities along with the yuan are selling off this morning despite the announced stimulus today.
- Hurricane Rafael has shifted southwest and is now expected to work toward eastern Mexico. (NOAA)
- 392,000 bpd of offshore crude production was shut in yesterday due to the hurricane. (BSEE)
- WTI time spreads have contracted this week reflecting weaker fundamentals.
- The Fed lowered interest rates by 25 bps yesterday.
- Fed Chair Jerome Powell said yesterday that Trump’s proposed policies of tariffs, deportations, and tax cuts would have no near-term impact on the US economy.
- The S&P and the DJIA both saw a record close yesterday.
- As of 7:41 am CST: Brent crude oil down $1.01 to $74.62, US dollar index up $0.183 to 104.691 while the nearby e-mini S&P 500 futures contract is down 5.25 to 5998.00.
Diesel
- Look for the 9 DMA near $2.2420 to provide daily support in the continuous HO contract.
- Medium-term 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
- Continuous RBOB may test support at its 50 DMA near $2.0151
- Continuous RBOB has trendline support near $1.9350.
- Open interest in Nymex gasoline has risen to its highest level since August.
Propane
- Conway futures are trading at .7500 while Belvieu is trading at .8125.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.7650.
- Conway propane is trading at 42% to WTI.
- The EIA reported propane stocks fell 1 million barrels last week.
- Propane exports posted their second-highest level on record at 2.289 mbpd last week.
Natural Gas
- Overnight weather runs added 1 HDDs for the two-week forecast.
- The EIA reported nat gas stocks rose 69 Bcf last week.
- Total working gas inventories sit at 3,932 Bcf which is 215 Bcf above 5-year average levels.
Continuous Daily WTI: The 50 DMA may look to play defense if early losses are extended throughout the session. Markets have seemed to consolidate into the close rather than extend in either direction this week so we’ll see if that pattern holds today.
