Outlook: The energy complex is finding marginal strength to start the week. Prices have again fallen to a consistent zone of support with crude in the upper $60s which may be enticing buyers. The overall bullish sentiment still feels lacking which may limit upside from here. Russia and Ukraine chatter has re-emerged over the weekend with reports that the US has permitted Ukraine to use US long-range missiles to hit targets deeper into Russia. Russia has said this will signal the US’ direct involvement in the war. With the deeper reach, additional Russian oil refineries could be at risk which poses an upside risk to the complex. WTI breached trendline support on Friday and time spreads are contracting to suggest bearish fundamentals ahead of the December contract expiration on Wednesday. Bearish price pressure could quickly return if fresh bullish elements remain absent this week. Macroeconomic reporting is light this week; however, several Fed officials will speak over the next few days which could influence the dollar which has reversed lower this morning.
Crude
- The Biden Administration has allowed Ukraine to use US-made weapons to strike deeper into Russia, according to two US officials on Sunday. (Reuters)
- The Kremlin said today that any such decision would mean the direct involvement of the US in the war.
- Saudi Arabia’s crude exports rose to their highest level in three months to 5.75 mbpd. (Reuters)
- China’s refinery throughput fell 4.6% y/y in October.
- Global crude in floating storage fell 14% last week to 50.97 mb.
- WTI’s prompt spread is approaching contango, trading to a low of 2 cents this morning.
- Managed money decreased net length in WTI by 13k lots last week (+10.4k short, -2.5k longs).
- Baker Hughes reported oil rigs rose by 1 to 478 last week.
- As of 8:17 am CST: Brent crude oil up $0.77 to $71.81, US dollar index down $0.128 to 106.560 while the nearby e-mini S&P 500 futures contract is up 8.25 to 5905.00.
Diesel
- China’s diesel exports were reported down 57% y/y in October. (BBG)
- Long-only positions in diesel were at their lowest level in over 4-years last week while short-only positions were at their lowest in 15 weeks.
- 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
- Gasoline exports from China have fallen to their lowest level since April, falling 8.2% from September and down 13% y/y. (BBG)
- Managed money has increased gasoline futures' net length to its highest level in six months.
- Continuous RBOB has trendline support near $1.9350.
Propane
- Conway futures are trading at .7175 while Belvieu is trading at .7750.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.7375.
- Conway propane is trading at 45% to WTI.
Natural Gas
- Weekend 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.
- Baker Hughes reported nat gas rigs fell by 1 to 101 last week.
Continuous WTI Spreads:
