Outlook: Crude and refined products are lower this morning while natural gas surges higher. Disappointing economic data from China over the weekend along with a lack of direct stimulus is providing bearish pressure today. Additionally, Hurricane Rafael has dissipated which should allow for Gulf production to return to normal levels. Geopolitical risk remains with reports that Qatar has pulled out of its mediation role in ceasefire discussions between Israel and Hamas. Iran is still expected to show some form of retaliation back at Israel but the timing remains uncertain and the market appears to be discounting its severity. The EIA, IEA, and OPEC+ will all release monthly reports this week. Given some of the soft data coming out of China over the last month, there may be a risk of lower demand revisions which could provide further headwinds this week.
Crude
- China’s consumer price index rose at its slowest pace in four months in October. (Reuters)
- China announced a 10 trillion yuan debt package on Friday but a lack of direct stimulus allowed for disappointment. (Reuters)
- 25% (483,000 bpd) of US oil production in the Gulf remained offline as of Sunday but should quickly recover with the storm dissipating. (Reuters)
- Saudi Aramco will export 36-37 million barrels of contractual supplies in December to China, down from 42-43 million in November.
- A Ukrainian drone strike set fire to the Rosneft PJSC-owned Saratov oil refinery in Russia over the weekend. It was the first strike on refineries in two months. (BBG)
- Qatar has stepped away from mediating ceasefire talks between Israel and Hamas.
- US inflation data will be reported on Wednesday this week.
- Baker Hughes reported oil rig counts remained flat at 479 last week.
- Nymex WTI net length rose by 55k lots (+34.5k longs, -20.1k shorts) through last Tuesday.
- As of 8:10 am CST: Brent crude oil down $1.70 to $72.12, US dollar index up $0.570 to 105.567 while the nearby e-mini S&P 500 futures contract is up 16.25 to 6042.00.
Diesel
- Nymex HO net length rose by 10.5 lots (-11.195 shorts, -716 longs) through last Tuesday. (COT)
- Medium-term support for HO may be found at the 50 DMA near $2.1986 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
- Nymex RBOB net length rose by 7.8k lots (-7,019 shorts, +731 longs) through last Tuesday. (COT)
- Continuous RBOB has trendline support near $1.9350.
Propane
- Conway futures are trading at .7325 while Belvieu is trading at .8050.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.7600.
- Conway propane is trading at 42% to WTI.
Natural Gas
- Overnight weather runs added 12 HDDs for the two-week forecast.
- 16% of US Gulf natural gas production remained offline as of Sunday.
- Baker Hughes reported nat gas rigs remained flat last week at 102.
- Managed money decreased nat gas net length by 13.7k lots through last Tuesday.
US Crude Production: US crude production hit record levels under the Biden Administration and further growth is expected into next year as Trump takes office. With many analysts already forecasted a surplus next year, producers may be cautious in increasing production in the wake of lower prices.
