Fed Announces It Will Taper Asset Purchases
November 4, 2021
The energy market had a big sell-off yesterday which was the result of several factors. Energy prices have been on a strong rally higher for some time and have needed a correction. It appears that correction started yesterday, and then additional items were added to the selling. The DOE inventory report came out and it was seen as bearish. Crude stocks were up 3.3 million barrels, gasoline stocks were down 1.5 million barrels and distillates were up 2.2 million. Gasoline inventories are now sitting at a 4 year low. Cushing, Ok crude oil stocks are at three year low. Fundamentally these concerns will continue to be watched.
The Fed announced that they will begin to taper their asset purchases next month and this news also added to the selling in energy. This news and the concern that this will lead the Fed to raise rates causes traders to reduce risks or take profits and move money to some other bucket seen as less risky. The market has already priced in two rates hikes next year.
OPEC+ meets today and the expectation is that they will continue with their plan to add 400,000 BPD more oil to their quotas for December. Despite President Biden asking for OPEC+ to do more this seems unlikely as many OPEC members still feel the need to move slowly on any changes. The other factor is that Saudi Arabia, OPEC’s biggest and most influential member, has not been happy with the Biden administration and doesn’t appear willing to consider much of their pleas for more oil.
Propane stocks were up 432,000 barrels much less than the market had expected. Prices held steady after the report and will likely not have much downside as the market just waits on more demand. Total stocks now sit at 76.098 million barrels and last year there were 95.828 million barrels. Midwest stocks were up 401,000 barrels putting total stocks at 25.373 million and last year there were 25.869 million barrels. The Gulf Coast had stocks down 536,000 barrels putting total stocks at 35.953 million and last year there were 56.145 million.