Outlook: The energy complex is idle this morning after showing a strong move higher yesterday. The production outage at Norway’s Sverdrup oilfield is already in the process of being resolved with capacity being reported at nearly 70%. Geopolitical tensions have risen between Russia and Ukraine but similar to the conflict in the Middle East, until physical barrels are disrupted, risk premium quickly finds resistance. President-elect Donald Trump has stated he intends to end the war between Russia and Ukraine as fast as possible when he takes office. Still, with over 2 months until inauguration day, there is plenty of time for escalation. Rumors of ceasefire progress in the Middle East are swirling again this week and may look to offset the added risk premium yesterday. In the US, crude spreads are contracting further this morning after the prompt spread flipped to contango for the first time since February. Reuters expects crude stocks rose again last week and we’ll be the API survey this afternoon before the EIA reports tomorrow morning.
Crude
- India’s October oil product demand is expected to rise 2.9% y/y to 5.1 mbpd. November growth is expected to accelerate to 4.5% y/y growth. (S&P Global)
- Russian President Vladimir Putin approved an updated nuclear doctrine, saying that Russia could consider using nuclear weapons if it was subject to a conventional missile assault supported by a nuclear power.
- Crude production outages at Sverdrup oilfield in Norway and Tengiz oilfield in Kazakhstan supported crude prices yesterday along with renewed geopolitical risk between Russia and Ukraine.
- WTI’s prompt spread tipped into contango yesterday despite outright prices lifting over 2 dollars.
- Reuters estimates crude stocks rose 800,000 barrels last week.
- The API will report its inventory survey this afternoon after 3:30 pm CT.
- As of 6:51 am CST: Brent crude oil down $0.19 to $73.11, US dollar index up $0.106 to 106.380 while the nearby e-mini S&P 500 futures contract is down 17.25 to 5903.00.
Diesel
- Continuous HO closed above its 50 DMA and 9 DMA yesterday. The 100 DMA provided resistance in early Nov and currently sits near $2.2931.
- Reuters estimates diesel stocks fell 400,000 barrels last week.
- 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
- US fuel makers in the Gulf processed 9.31 mbpd of crude last week, highest seasonally since 1992, according to the EIA.
- The US is on pace to ship 2.96 mbpd of products including gasoline and diesel this month, which would be the highest in 7 years. (BBG)
- Reuters estimates gasoline stocks rose 1.6 million barrels last week.
Propane
- Conway futures are trading at .7275 while Belvieu is trading at .7850.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.7400.
- Conway propane is trading at 45% to WTI.
Natural Gas
- Natural gas traded in 14 cent range yesterday but ultimately closed higher. Look for $3.00 to provide resistance and a selling opportunity.
- Extended forecasts for January and February are still tracking warmer than normal.
- Reuters estimates natural gas change between -1 and 14 Bcf last week.
Propane Swap Curve:
