Crude outlook is negative and volatility is high
November 15, 2024
The DOE inventory report had crude oil stocks up 2.09 million barrels, gasoline stocks were down 4.41 million barrels and distillates were down 1.39 million barrels.
The propane inventory report called inventories down 2.141 million barrels putting total stocks at 98.368 million barrels and last year stocks were 99.742 million barrels. Midwest stocks were down 137,000 barrels putting total Midwest stocks at 28.76 million and last year there were 26.947 million barrels. Gulf Coast stocks were down 1.019 million barrels putting total stocks at 56.067 million barrels and last year there were 56.071 million barrels. Propane stocks are still ample, and the weather forecast for the next week is not propane weather. There is the potential here for the following week to have some colder temperatures.
Energy markets are balled up in uncertainty with no direction or trend and searching for these things. One thing is known and that is volatility is high with the currently implied volatility at roughly 25%. At some point prices will move either up or down when a trend emerges. The outlook on crude is negative and the market still has wars taking place, high geopolitical risks, and a new administration. There are plenty of issues that could have an impact these markets.
UBS said it reduced its Brent crude forecast to $80 per barrel in 2025 but continues to see upside from current price levels. It cut its oil price forecast due to weaker oil demand growth.
China’s oil refineries processed 4.6% less crude in October, partially due to refinery shutdowns and lower production at smaller plants.
The Fed’s comments said they are not rushing to cut rates and that is also putting some pressure on oil prices as lower rates usually help support more demand.
The outlook for demand is still weak driven by several factors but China poor outlook is the biggest drag.
Energy markets are flat currently and without a strong rally they will be down on the week.