Outlook: Energies are lower this morning and remain on track for weekly losses. Early reporting ahead of the OPEC meeting suggesting a delay to their production increases provided strength earlier in the week but a buy-the-rumor and sell-the-fact event looks to be the result. The US also announced additional sanctions against carriers transporting Iranian crude this week but previous efforts have shown a lack of results in limiting Iran’s exports. Several banks have adjusted their supply and price forecasts this week in reaction to the OPEC+ decision. The majority have Brent averaging between $65-$70 next year which would price WTI between $61-$66 using the current spread. The forecast of an oil surplus still looks to be the consensus even with the OPEC delays which could continue to provide headwinds. From a technical standpoint, prices are dipping to levels that have provided buying opportunities over the last several months and may again entice new interest.
Crude
- Chevron plans to reduce capital expenditure in the Permian Basin to between $4.5 billion and $5 billion in 2025, which is roughly a 10% decline. This will mark their first budget cut since 2021.
- A Bloomberg survey last month saw the US adding 251,000 bpd of oil production through 2025, which would be the slowest pace since the pandemic.
- Yesterday, OPEC+ pushed back the start of oil output increases till April. The group will look to add 2.2 mbpd of oil production through 2026.
- Bank of America still expects an oil surplus to weigh on prices next year with Brent crude averaging $65.
- Nonfarm payrolls were reported at 227k vs 220k est. Unemployment was reported at 4.2% vs 4.1% est.
- Baker Hughes will report rig counts at 12:00 pm CT.
- As of 8:32 am CST: Brent crude oil down $0.69 to $71.40, US dollar index up $0.107 to 105.818 while the nearby e-mini S&P 500 futures contract down up 11.25 to 6100.00.
Diesel
- India’s diesel sales rose 8.5% in November, up 9.6% y/y.
- US diesel exports to Europe’s ARA hub are expected to hit all time highs in December at 250,000 bpd. The monthly average from January-October was 28,000 bpd. (Reuters)
- US total diesel exports totaled 1.55 mbpd last week, which was the highest seasonal level since November 2018.
- Diesel basis values remain soft in Group 3 and Chicago which may present opportunities to fill storage and sell futures as a hedge to carry product with favorable basis to demand season.
Gasoline
- India’s gasoline sales rose 9.6% y/y in November.
- AAA reports the national average gas price at $3.026, down ~4 cents from last week.
Propane
- Conway futures are trading at .7475 while Belvieu is trading at .7675.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.7350.
- Conway propane is trading at 44% to WTI.
- The EIA reported propane stocks fell 662,000 barrels last week vs -2.2 mb est.
- Domestic propane demand saw a sharp decline last week of 860,000 bpd, which was 51% of total demand.
Natural Gas
- Overnight weather runs removed 2 HDDs through the two-week forecast.
- Dutch TTF is on track to close down 3% on the week. Temps in Europe are expected to rise above averages for the second half of December.
- The EIA reported natural gas stocks fell 30 Bcf last week.
Continuous Daily HO: Diesel futures have broken below trendline support today. Look for $2.10 as the next area of support which provided a bounce in late October.
