Outlook: Crude and refined products are near unchanged this morning while natural gas futures continue to surge. The Fed announced a 25 basis point cut to interest rates yesterday as expected but hawkish rhetoric pressured the complex following the announcement. The US dollar surged over 1000 points to its highest level since November 2022 to provide an additional headwind in the afternoon trade. Rate cuts bets strongly favored a pause in January prior to the announcement and that percentage has now grown further. Energy markets remain in a sideways trade pattern with WTI prices on track for its third tightest yearly trade range in two decades. Geopolitical developments that have fueled volatility have grown quieter over the last few months but shouldn’t be discounted for future influence. Look for technicals to guide markets between the recent trade ranges until a more convincing price driver develops.
Crude
- The Fed cut interest rates by 25 bps yesterday as expected but hinted at a slower approach into next year. Equities sold off while the dollar surged following the statements.
- JP Morgan analysts said that global oil demand growth in December had fallen 700,000 bpd below their expectation. (Reuters)
- China’s largest refiner, Sinopec, said it expects China’s oil consumption to peak by 2027. (Reuters)
- A drone attack overnight set fire to Russia’s Novoshakhtinsk refinery near the Ukrainian border. The facility processes around 70,000 bpd. (BBG)
- Today is LTD for January WTI.
- The EIA reported crude stocks fell 900,000 barrels last week vs -1.9 mb est.
- US crude exports jumped 1.8 mbpd last week to 4.9 mbpd.
- As of 7:25 am CST: Brent crude oil down $0.15 to $73.24, US dollar index down $0.058 to 107.969 while the nearby e-mini S&P 500 futures contract up 46.25 to 5917.00.
Diesel
- The EIA reported diesel stocks fell 3.1 million barrels last week vs -500 kb est.
- US diesel demand rose 1.05 mbpd last week to its highest level since March 2022.
Gasoline
- The EIA reported gasoline stocks rose 2.3 million barrels last week vs +1.5 mb est.
- China’s largest oil refiner said the country’s gasoline demand peaked last year and declines would accelerate as the shift to electric vehicles gather pace. (BBG)
Propane
- Prompt Conway futures are trading at .7300 while Belvieu is trading at .7625.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.7400.
- Conway propane is trading at 45% to WTI.
- The EIA reported propane stocks fell 2.9 million barrels last week vs -2.1 mb est.
Natural Gas
- Overnight weather runs removed 3 HDDs through the two-week forecast.
- Natural gas futures have risen nearly 30 cents on the week with prices up another 4% today.
- Reuters estimates natural gas stocks fell between -129 and -115 Bcf last week.
Crude Volatility: WTI prices have swung in a band of $22.40 so far this year which is the third smallest range in two decades.
