Weakening Chinese Growth and Exports Has Energy Prices Choppy
October 18th, 2019
Propane inventories were down 328,000 barrels in yesterday’s inventory update. Midwest stocks were down 309,000 barrels and Gulf Coast stocks were down 766,00 barrels. Total stocks are still at 100.445 million barrels. Midwest stocks are 773,000 barrels less than last year at this time. Gulf Coast stocks are 18.689 million barrels more than last year at this time. Export were up 128,000 barrels to a total of 1.257 million barrels. Export capacity is supposed to increase at the end of the month so traders will be keeping an eye on exports to see if they do indeed increase. Export are strong and production is strong as well at 2.166 million barrels. Export will need to increase, and demand will need to pick up to have a chance to eat into current inventory levels.
The DOE inventory report said the crude oil stocks were up 9.28 million barrels to a total of 434.850 which is 18.409 million more barrels than last year at this time, Gasoline stocks were down 2.56 million barrels putting total stocks at 226.201 million barrels 7.955 million barrels less than last year at this time. Distillate stocks were reported down 3.82 million barrels putting total stocks at 123.501 million barrels which is 9.137 million less barrels than last year at this time. The stocks of diesel are a bit of a concern as the market is headed toward the January 1 implementation of the IMO 2020 rules for the shipping industry. But there are other reports that large amounts of compliant fuels are being stored in ships off the coast of a few keep ports around the world. The impact of IMO 2020 is still a hard situation to judge the impact as global economies struggles which impacts energy demand and the outlook for energy demand going forward. It is hard to say whether the market is prepared for this event as there are a lot of unknows currently and there both positive and negative outlooks.
US refineries ran at 83.1% of capacity the lowest level since 2017. Distillate and gasoline production were lower as a result of this and helped the inventory report to show draws in gas and diesel inventories. These factors are what the market focused on and brushed off the big 9.3 million barrel build in crude oil stocks.
China reported their annual growth rate was 6% in the third quarter. This is the weakest growth in China in over 27 year. This does not paint a very good outlook for China’s economic growth moving forward. Their exports were down for the fifth month in a row. This is a sign that the trade was is having its impacts on their economy. The US is not immune to this either and the China and US trade war will continue to be seen as a negative until it can get resolved.
The US dollar has been on a steady decline over the last 10 days of trading and that decline is helping to support energy prices. There were also other supportive factors to the energy markets yesterday, a cease-fire between Turkey and Syria. The potential that a Brexit deal finally get sent to parliament for a vote, and the market is keeping an eye on a tropical storm that is expected to move through the Gulf of Mexico.
The market has been missed and choppy so for today in early trading.