Outlook: As one war goes quiet, the other finds escalation, which is what we are seeing after Ukraine launched US missiles into Russia yesterday. The development has stoked enough risk premium to push WTI prices back above $70 this morning. The prompt WTI spread which briefly flipped to Contango this week and swiftly moved back to backwardation with today being LTD for the December contract. Another significant geopolitical development being reported is Iran agreeing to halt production of enriched uranium, which is nearing levels required to produce nuclear weapons. Iran had previously been non-compliant with sanctions targeting uranium production which led to a sharp decline in crude exports when sanctions were expanded. The market could find further influence from the EIA stats later this morning. The API survey showed a larger-than-expected build in crude and a larger-than-expected draw in gasoline stocks.
Crude
- Iran has agreed to the International Atomic Energy Agencies' request to halt production of enriched uranium which is nearing levels required for nuclear weapons. (BBG)
- Yesterday, Ukraine used US ATACMS missiles to strike Russian territory for the first time.
- North Dakota’s oil production hit a 5-month high in September after rising 20kbpd m/m to 1.2 mbpd.
- Norway’s Johan Sverdrup oilfield has resumed full output after being knocked offline due to a power outage.
- Continuous WTI’s 50 DMA sits at $70.63
- Reuters estimates crude stocks rose 100,000 barrels last week.
- The API survey showed crude stocks rose 4.8 million barrels last week.
- The EIA will report inventories at 9:30 am CT.
- Today is LTD for December WTI.
- As of 8:42 am CST: Brent crude oil down $0.42 to $73.73, US dollar index up $0.463 to 106.668 while the nearby e-mini S&P 500 futures contract is down 23.25 to 5915.00.
Diesel
- BP’s Whiting refinery has delayed its restart due to mechanical issues during the restart process. Chicago basis rose ~12 cents in response.
- The API survey showed diesel stocks fell 700,000 barrels last week.
- Reuters estimates diesel stocks fell 200,000 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
- The API survey showed gasoline stocks fell 2.5 million barrels last week.
- Reuters estimates gasoline stocks rose 0.9 million barrels last week.
Propane
- Conway futures are trading at .7275 while Belvieu is trading at .7925.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.7400.
- Conway propane is trading at 44% to WTI.
- OPIS estimates propane stocks fell 1.5 million barrels last week.
Natural Gas
- Overnight weather runs added 14 HDDs to the two week forecast.
- Continuous NG is looking to close above $3.00 for the first time since June.
- Reuters estimates natural gas change between -1 and 14 Bcf last week.
Continuous Daily NG: A bump in demand expectations over the next two weeks has natural gas prices testing their highest level since June.
