Outlook: Energy markets are looking to finish the week lower with the majority of price action occurring on Monday. Prices have consolidated throughout the rest of the week and crude, gas, and diesel futures are all seeing wedge patterns on the charts work tighter. A weak demand outlook has been a key theme this week with China reporting sluggish import/export data and the big three (EIA, IEA, OPEC) failing to produce optimism in their monthly reports. The US dollar started the morning lower but is again finding strength which has also provided headwinds across commodities this week. The shifting economic environment is reducing confidence that the Fed will cut interest rates again in December which could limit the pace of economic recovery and translate to slower demand growth. Geopolitical events in the Middle East have been the primary bullish driver over the last several months, but the trail has gone cold since Israel launched its retaliation against Iran a few weeks ago. Technical support helped keep prices from falling to October and September lows so far and it's clear the market is looking for a fresh catalyst to drive the next move out of the recent range.
Crude
- Chinese oil refiners process 4.6% less crude in October y/y due to plant closures and reduced operating rates at smaller independent refiners. (Reuters)
- China is lowering its export tax rebate for refined products from 13% to 9%. (BBG)
- Fed Chair Jerome Powell spoke yesterday and stated the economy is not calling for urgency in the pace of rate cuts and that the labor market has remained resilient.
- Implied volatility for both WTI and Brent in the second month contract has fallen to its lowest level since September.
- The EIA reported crude stocks rose 2 million barrels last week.
- Refinery utilization rose 0.9% last week to 91.4% and 5.8% above 5-year average levels.
- Baker Hughes will report rig counts at 12:00 pm CT.
- As of 8:44 am CST: Brent crude oil down $0.73 to $71.83, US dollar index up $0.117 to 106.794 while the nearby e-mini S&P 500 futures contract is down 45.25 to 5931.00.
Diesel
- The EIA reported an unexpected draw of 1.4 million barrels in diesel stocks last week.
- Diesel demand rose 692,000 bpd last week but 4-week average diesel demand fell 29,000 bpd.
- Due to declining basis levels, we advise destocking bulk plants if you are holding product purchased at higher basis levels during the demand season.
Gasoline
- The EIA reported an unexpected draw of 4.4 million barrels for gasoline stocks last week.
- Gasoline stocks are at a 2-year low and a 10-year seasonal low after last week’s draw.
- Gasoline demand rose 555,000 bpd last week while 4-week average demand rose 191,000 bpd.
- Continuous RBOB has trendline support near $1.9350.
Propane
- Conway futures are trading at .7325 while Belvieu is trading at .7950.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.7500.
- Conway propane is trading at 45% to WTI.
- The EIA reported a larger than expected draw of 2.1 million barrels for propane stocks last week.
Natural Gas
- Overnight weather runs removed 8 HDDs from the two week forecast.
- Weather in the lower 48 is expected to remain above normal through Nov 20th but shift colder in the back third of the month.
- The EIA reported natural gas stocks rose 42 Bcf last week.
- Natural gas inventories have risen more than expected for four consecutive weeks.
Continuous Daily RBOB:
