China reduces export tax rebates on fuel
November 18, 2024
The Baker Hughes Rig Count had oil rigs down 1 to a total of 478 and last year at this time oil rigs were at 500. But despite the decline in rigs oil prodctuion was reported again this week in the DOE report at 13.4 million barrels per day right up near record highs.
WTI crude oil was down roughly $3 dollar per barrel last week and it is starting off this week with a move higher which is not unexpected. This market is still congested looking for direction. The crude market has been weak pushed lower by a poor demand outlook mainly on a weak China.
The bounce this morning in energy could also be the result of the Biden administration approving the use of US-manufactured long-range missiles to strike Russian territory. This news could have traders adding in some risk premium here this morning as the threat of a wider conflict increases. North Korea is also sending more troops to support Russia, potentially widening the conflict.
The Chinese government is reducing export tax rebates from 13% to 9%, which includes gasoline, jet fuel, and diesel. This is likely in response to potential US tariffs. This news helped offer some support to gasoline’s upside on Friday.
US diesel demand is at its lowest seasonal level in 10 years as harvest is winding down and heating demand has yet to arrive in full force. Diesel inventories remain tight, but the deficit to the 5-year seasonal average has narrowed over the past several weeks. Soft demand in diesel has been a hallmark for this year but the EIA is expecting demand to tick up next year according to its latest Short Term Energy Outlook (STEO) indicating that lower rates will drive industrial activity going forward.