Refineries earnings signal demand outlook

Commodities

Oil outlooks continue to fluctuate but a few upcoming announcements may give some clarity.

Prices are holding around $38 per barrel for WTI while Brent crude is roughly $40 p/b.

Refineries are looking to announce their earnings this week, which may give indicators towards Q4 oil demand, specifically on gasoline, diesel and jet fuels.

Valero Energy reported an uptick in demand during Q3, up from Q2, but still way below 2019 volumes.

Q4 forecasts suggest 2.5mpd demand, which is 500,000 lower than Q4 2019’s numbers.

Inventories are thusly high while demand is low.

Majors ExxonMobil and Chevron will be reporting their quarterly earnings this week on October 20th. It will be interesting to see how the supermajors have coped. Exxon alone announced a first-quarter loss of $610m in May 2020. Its performance will be indicative of the industry as a whole.

40 North American oil & gas producers have declared bankruptcy this year. This may point towards a) further closures industry-wide or b) closer collaboration and mergers.

For instance, Conoco Phillips announced last week it was acquiring Concho Resources. Will this be an ongoing trend?

In Natural Gas, markets anticipate bullish natural gas prices in the short and mid. There are several factors at play here including:

  • an unexpected jump in US LNG exports in the coming weekend
  • Potential production drops
  • A major temperature shift towards colder temperatures.

Resilience in natural gas prices is likely to emerge as we head into winter. Colder temperatures point towards stimulated demand for gas for heating and so on. Therefore, the coming months may prove beneficial for commodities traders – if a little cold.