Outlook: The energy complex is mixed today with crude and gasoline higher while diesel lags lower. Crude is outpacing products, finding support from a sixth consecutive week of inventory draws while refined product stocks saw significant builds. Refinery run rates continue to run above seasonal norms to keep inventories well supplied. Globally, several Middle East cash crude varieties have seen higher premiums as Asian refiners show strong purchasing. China rolled out further stimulus measures which is a trend that is expected to continue with tariffs looming. Overall, colder weather forecasts helped prop up the market earlier this week, and a lack of bearish sentiment to follow has allowed prices to hold.
Crude
- Yesterday, Bloomberg reported President Biden plans to issue a decree that would permanently ban the development of new offshore oil and gas assets in certain regions of US coastal waters.
- China announced a surprise move to increase wages for government workers and increase funding from ultra-long treasury bonds which aims to boost growth. (Reuters)
- WTI time spreads have deepened backwardation with the rally and the prompt spread has risen to its highest level since October at 74 cents.
- The EIA reported US crude stocks fell 1.2 million barrels last week vs -2.8 mb est. This was the sixth consecutive weekly draw for crude stocks.
- US refinery utilization rose 0.2% and is 5.4% above 5-year average levels.
- US ISM Manufacturing PMI was reported at 49.3 vs 48.4 est. and 48.4 last.
- As of 9:36 am CST: Brent crude oil up $0.28 to $76.21, US dollar index down $0.262 to 109.132 while the nearby e-mini S&P 500 futures contract up 43.25 to 5960.00.
Diesel
- Cold weather poses shutdown risk to refiners through next week.
- Backwardation has been steadily increasing with the 6-month time spread out to nearly 9 cents. Deeper contango in basis is still providing incentive to store product and hedge.
- The EIA reported diesel stocks rose 6.4 million barrels last week vs +3.5 mb est.
- US diesel demand fell 24% last week to 3.2 mbpd.
Gasoline
- The EIA reported gasoline stocks rose 7.7 million barrels last week vs +400 kb est.
- US gasoline demand fell 9.3% last week to 8.1 mbpd.
Propane
- Prompt Conway futures are trading at .8275 while Belvieu is trading at .8475.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.7950.
- Conway propane is trading at 46% to WTI.
- The EIA reported propane stocks fell 552,000 bpd last week vs -3.4 mb est.
- Domestic propane demand plummeted by 52% last week to 829,000 bpd.
Natural Gas
- Overnight weather runs removed 14 HDDs through the two-week forecast.
- US LNG exports rose 9% m/m in December and are up 3.3% y/y for 2024.
- Reuters estimates natural gas stocks fell between 127 and 141 Bcf last week.
- The EIA will report inventories today at 9:30 am CT.
Continuous Daily HO:
