Outlook: Energies are lacking conviction this morning as they trade near unchanged which feels like a win for the bulls. Despite sitting in overbought territory for several sessions, the market has been reluctant to sell off. WTI is testing $75 this morning for the first time in three months and HO closed above its 200 DMA for the first time in 11 months yesterday. Crude spreads have continued to work into deeper backwardation during the bullish run. This is being further supported by the potential for Cushing stocks to fall to 8 ½ year lows last week if the EIA report aligns with the API. The large refined product builds shown by the API are putting pressure on crack spreads but the outright contracts appear to be seeing minimal impact. The US dollar is up over 600 points today and could find renewed direction following the release of the Fed minutes at 1:00 pm today. Nonfarm payrolls will be another key report to watch this week which will be released Friday morning.
Crude
- Russia’s seaborne crude exports fell to 20.17 mbpd last week, down from 21.51 mbpd in the previous week, and lowest since August 2023. (BBG)
- Iran is trying to recover 25 million barrels of oil that is stranded in China which was delivered in 208 following sanction waivers granted by the Trump administration. (Reuters)
- WTI futures traded above $75 this morning for the first time in 3 months.
- Reuters estimates crude stocks fell 300,000 barrels last week.
- The API survey showed crude stocks fell 4 million barrels last week.
- The EIA will report inventories at 9:30 am CT.
- FOMC meeting minutes will be reported today, and US nonfarm payrolls will be reported on Friday.
- As of 8:02 am CST: Brent crude oil up $0.06 to $77.10, US dollar index up $0.659 to 109.201 while the nearby e-mini S&P 500 futures contract up 4.25 to 5958.00.
Diesel
- Reuters estimates diesel stocks rose by 500,000 barrels last week.
- The API survey showed diesel stocks rose 3.2 million barrels last week.
- Continuous HO closed above its 200-day moving average for the first time in 11 months.
- Both Group and Chicago diesel basis saw declines yesterday. A lack of local demand and higher futures prices could create steeper basis discounts. Be conscious of your rack basis values if you are looking to store product.
Gasoline
- Reuters estimates gasoline stocks rose 500,000 barrels last week.
- The API survey showed gasoline stocks rose 7.3 million barrels last week.
- RBOB cracks have moved sharply lower this week with the prompt crack below $11 today.
Propane
- Prompt Conway futures are trading at .8550 while Belvieu is trading at .8600.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.8025.
- Conway propane is trading at 46% to WTI.
- OPIS estimates propane stocks fell 2.7 million barrels last week.
- Propane values have risen ~15 cents over the last two weeks.
- January HDDs are around 105% of the 30-year average.
Natural Gas
- Overnight weather runs added 6 HDDs to the two week forecast.
- A winter storm is moving into Texas this week which could bring 4 to 6 inches of snow and ice. ERCOT warned of potential tight power conditions from January 8th-10th.
- Reuters estimates nat gas stocks fell between 33 and 80 Bcf last week.
WTI Prompt Spread: WTI has seen backwardation expand since mid-November. A backwardated market can indicate tight supplies or strong demand. Cushing Oklahoma is the delivery point for WTI crude and the API stats suggest these stocks have fallen to 8.5 year lows.
