Outlook: The energy complex is beginning to reflect a sideways range after the breakout moves higher last week. Yesterday’s EIA report certainly leaned bearish, led by refined products which saw larger than expected builds and lackluster demand growth. WTI stocks at Cushing grabbed headlines after falling 2.5 million barrels to a 10 year low at 20 million barrels. At this level, stocks are very close to operational minimums and the prompt WTI spread has expanded to reflect the tighter environment. The Fed minutes yesterday revealed that almost all participants see upside risks to inflation increasing. The committee overall indicated that we are at or near the point at which it would be appropriate to slow the pace of policy easing. We’ll look to the nonfarm payroll report tomorrow morning for further macroeconomic influence.
Crude
- President Biden is expected to announce new sanctions against Russia this week. (Reuters)
- China’s consumer inflation growth weakened to 0.1% in December, marking a fourth straight month of decline.
- Iraq intends to increase oil prices to Asia, Europe, and the US in February, following Saudi Aramco’s announcement earlier this week.
- WTI’s aggregate open interest has risen to its highest level since March 2022. (BBG)
- WTI spent 4 sessions trading in overbought territory relative to the 9-day RSI but has now dropped out of that zone.
- The EIA reported crude stocks fell 959,000 barrels last week vs -200kb est.
- Cushing stocks fell 2.5 million barrels to a 10 year low of 20.038 million barrels.
- US nonfarm payrolls will be reported on Friday.
- As of 8:00 am CST: Brent crude oil up $0.20 to $76.36, US dollar index down $0.047 to 109.043 while the nearby e-mini S&P 500 futures contract up 4.25 to 5958.00.
Diesel
- The EIA reported diesel stocks rose 6 million barrels last week vs +600kb est.
- 4-week average diesel demand fell 1.8% last week.
- Rack basis values continue to fall this week. Be conscious of your rack basis values if you are looking to store product. Last January Group3 basis fell below -50c while current trade is around -30 cents.
- Feb-Jun HO Backwardated ~10 cents.
Gasoline
- The EIA reported gasoline stocks rose 6.3 million barrels last week vs +1.5mb est.
- 4-week average gasoline demand fell 1% last week.
- RBOB cracks have moved sharply lower this week.
Propane
- Prompt Conway futures are trading at .8600 while Belvieu is trading at .8600.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.7925.
- Conway propane is trading at 46% to WTI.
- The EIA reported propane stocks fell 2.4 million barrels last week vs -2.7mb est.
- Domestic propane demand rebounded 73% last week to 1.4 mbpd.
Natural Gas
- Overnight weather runs were unchanged through the two week forecast.
- The EIA reported Henry Hub natural gas cash prices fell to the lowest inflation-adjusted level on record at $2.21 for 2024. Prices fell 16% y/y.
- Reuters estimates nat gas stocks fell between 33 and 80 Bcf last week.
- The EIA will report inventories at 9:30 am CT.
Group 3 Basis Forward Curve: The Contango in the in the basis curve continues to strengthen with spot values plummeting this week.
