Ryan Kaup

Apr 8, 2021

Outlook: Energy markets have taken a step back this morning as bearish data from the EIA has weighed on the complex. Yesterday the EIA reported that crude oil stocks fell, while large builds in gasoline and distillate inventories more than offset the crude oil draw. Adding pressure to the downside this morning is the news that discussions between the U.S. and Iran are continuing to progress. Members of the 2015 nuclear accord are holding discussions in Vienna this week to attempt to revive the agreement. Both the U.S. and Iran are expecting this to be a tedious process, as Iranian officials have rejected any in-person discussions thus far. It is notable to keep track of however, as Iran has the capacity to increase production to around 4 million bpd. Iranian crude production currently stands around 2.35 million bpd. The U.S. has strongly sanctioned the Iranian energy industry, which has greatly limited their ability to export crude. A bit of positive news this morning is that U.S. airline travel has slowly been increasing over the last several months. According to TSA checkpoint data, 1.23 million passengers went through airport security yesterday. In 2020, that number was under 100,000. CNBC is reporting that major U.S. airlines are shifting focus and are looking to hire pilots. American Airlines has stated that net bookings last week were down just 10% when compared to the same time period in 2019. Equities are having a mixed session as the DJIA is trading both sides of even, while the Nasdaq Composite and S&P 500 are holding onto small gains. The S&P 500 closed at an all-time yesterday and has pushed through that level this morning.

 

Crude

 

  • According to the U.S. Department of Labor, first-time claims for unemployment insurance totaled 744,000 for the week ending April 3. Economists polled by Dow Jones anticipated 694,000 first-time claims. The four-week moving average has now risen to 723,750. Continuing claims, which are those that have filed for at least two weeks straight, have fallen to 3.73 million, which is the lowest since March 21, 2020.
  • Treasury Secretary Janet Yellen stated on Wednesday that the Biden administration’s proposed changes to the corporate tax code would help recoup about $2 trillion in corporate profits into the U.S. that are currently held overseas. The Biden administration is pushing for an increase in the corporate tax rate in order to help fund the $2.25 trillion infrastructure plan that was announced recently.
  • Russian oil and gas condensate output has risen to 10.52 million bpd in the first week of April, according to data from Reuters. That is an increase from the 10.25 million bpd average seen in March.
  • The May crude oil contract is trading $0.49 lower at $59.28. The 20-day and 100-day moving averages are $61.39 and $54.03, respectively. The 14-day RSI is 46.51%.
  • As of 10:26 am CST: June Brent is down $0.10 at $63.06, the U.S. dollar index is 0.311 lower at 92.144, while the nearby e-mini S&P 500 futures contract is up 9.25 points at 4,079.25.

 

Diesel

 

  • The May ULSD contract is trading $0.0117 lower at $1.7962. The 20-day and 100-day moving averages are $1.8328 and $1.6321, respectively. The 14-day RSI is 47.93%.
  • U.S. refiner Valero Energy warned today that its first-quarter losses would likely exceed the previous quarter. The company cited the bitterly cold weather in Texas in February that shutdown several refineries for weeks as the reason for the projected losses.
  • Yesterday the EIA reported that U.S. distillate stocks rose 1.450 million barrels in the week ending April 2. Distillate demand fell 449,000 bpd to 3.664 million bpd.

 

Gasoline

 

  • The May RBOB contract is trading $0.0025 lower at $1.9493. The 20-day and 100-day moving averages are $1.9963 and $1.7067, respectively. The 14-day RSI is 48.02%.
  • Yesterday the EIA reported that U.S. gasoline inventories rose 4.044 million barrels last week. Gasoline demand fell slightly, down 110,000 bpd to 8.781 million bpd.
  • Despite the large build in gasoline stocks, and the contraction in demand, U.S. gasoline demand has found its way back into seasonally normal levels. With somewhat strong demand and low inventories in the Midwest, basis values are likely to be pressured higher as we approach the summer driving season.

 

Propane

 

  • Propane prices are moving lower this morning. At last look, Conway propane was down $0.0200, trading at $0.7850. Mt. Belvieu was down $0.0700, trading at $0.8500.
  • Yesterday the EIA reported that U.S. propane inventories rose 325,000 barrels in the week ending April 2. Propane demand saw a small contraction of 17,000 bpd, dropping to 1.659 million bpd. Exports fell quite dramatically, dropping 417,000 bpd to 713,000 bpd.

 

Natural Gas

 

  • The May Natural Gas contract is trading $0.007 lower at $2.513. The 20-day and 100-day moving averages are $2.580 and $2.687, respectively. The 14-day RSI is 40.97%.
  • This morning the EIA released its Weekly Natural Gas Storage Report. They showed that working gas in storage rose 20 Bcf in the week ending April 2. Natural gas stocks are 235 Bcf lower than last year at this time, and 24 Bcf below the five-year average.