Outlook: The energy complex is finding a bounce this morning with crude and refined products all observing gains. Continuous WTI closed below its 50 and 100 DMA yesterday but the deviation from the $72 - $74 range looks to be calling for correction. A test of $70 is still in the cards unless a significant bullish development arises. Gas is outpacing diesel today but the fundamentals would suggest diesel has more upside potential. The RVP change in gasoline approaches and March futures have continued to find steeper discounts to April this month which could suggest a winter fuel glut. Markets may be finding support from news of Saudi Aramco increasing oil prices to Asia. This is typically a positive demand indicator and may be something OPEC+ is looking for ahead of their anticipated production increases starting in April. Outside markets are seeing a quieter move today with nonfarm payroll data for January due out tomorrow morning.
Crude
- Saudi Aramco increased its price of oil to Asia by the most in two years. (BBG)
- China’s state-run refiners are expected to resell US oil cargoes following Beijing’s response to US tariffs. (BBG)
- China imported around 190,000 bpd of US crude in 2024 which is less than 2% of their total imports. (BBG) *see chart below.
- The US is expected to present a plan to end the war in Ukraine next week (BBG)
- WTI’s second-month 25-delta put skew fell to its most bearish level since early December. (BBG)
- WTI options traded for early next year that would profit a buyer from a move into Contango. (BBG)
- The WTI prompt spread is trading below 30 cents this morning which is down over $1.30 from the January high.
- The EIA reported crude stocks rose 8.6 million barrels last week.
- US crude production was estimated up 238,000 bpd to 13.478 mbpd last week.
- Nonfarm Payrolls will be reported on Friday.
- As of 8:15 am CST: Brent crude oil up $0.57 to $75.18, US dollar index up $0.401 to 107.980 while the nearby e-mini S&P 500 futures contract up 15.25 to 6102.00.
Diesel
- The EIA reported diesel stocks fell 5.4 million barrels last week vs -2 mb est.
- 4-week average diesel demand rose 9.1% last week to 4.26 mbpd.
- Rack basis discounts continue to trend favorably for storing product ahead of demand season. Group spot basis is trading around -17.75 cents.
- Prompt HO spread is trading around +5 cents.
Gasoline
- The EIA reported gasoline stocks rose 2.2 million barrels last week vs -300 kb est.
- 4-week average gasoline demand fell 0.5% last week to 8.26 mbpd and below 5-year average levels.
Propane
- Prompt Conway futures are indicated at .8900 while Belvieu is trading at .9125.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.8050.
- Conway propane is trading at 51% to WTI.
- The EIA reported propane stocks fell 4.8 million barrels last week vs -3.3 mb est.
Natural Gas
- Overnight weather runs added 12 HDDs through the two week forecast.
- Turkey was the top destination for US LNG last month, taking 19 cargoes while the UK took 16 cargoes.
- Reuters estimates nat gas stocks fell between 138 and 182 Bcf last week.
- The EIA will report inventories at 9:30 am CT.
Chinese imports of US crude: US crude was already priced at a premium prior to the announced tariffs which held imports largely at symbolic levels. US oil accounted for 1.7% of Chinese oil imports in 2024 and this number could very well fall near zero with tariffs in place.
