Katie Murphy

Jun 11, 2021

Outlook: The petroleum complex started the session trading higher, set for another weekly gain, before biofuel mandate headlines pressured some markets lower. Crude markets have managed to climb back into positive territory, but products remain lower on the day. Headlines regarding the Biden Administration considering relief for biofuel blending mandates pressured markets early this morning. U.S. renewable fuel credits were seen falling by 15% shortly after the headline. These credits were recently seen at their highest price in the program’s history, pressuring fuel producers. Headlines have also weakened both heating oil and RBOB crack spreads this morning. Markets will watch these developments closely, as a decision would likely further affect product prices. Strengthening demand and robust economic recovery continues across the globe and should lend some support under the markets. While products now face some pressure, WTI crude is still set to see its third consecutive week of gains.

Crude

  • According to sources familiar with the matter, the Biden administration is looking into possibly providing relief for U.S. refiners from biofuel blending mandates. After this report, U.S. renewable fuel credits fell by about 15%.
  • In its monthly energy report, the IEA sees spare capacity for OPEC+ rising by 180,000 barrels next year to 50.55 million bpd due to increases by Mideast Gulf producers. The group also stated that OPEC+ will need to boost output more, in order to meet the expected demand in 2022.
  • Norway’s government announced its long-term energy strategy today, stating that the country would continue oil and gas extraction until 2050 and beyond. The government also stated however that they expect production will naturally decline by 65% by 2050.
  • The July crude oil contract is trading $0.18 higher at $70.47. The 20-day and 100-day moving averages are $67.12 and $61.54 respectively. The 14-day RSI is 67.81%.
  • As of 8:15 am CST: July Brent is up $0.03 at $72.55, the U.S. dollar index is 0.267 higher at 90.342, while the nearby e-mini S&P 500 futures contract is up 8.75 points at 4246.75.

Diesel

  • Sharp losses were seen this morning in reaction to headlines regarding the Biden administration and U.S. biofuel laws. Traders are concerned that lower RIN prices could lead to pressure on the ULSD market.
  • The July ULSD contract is trading $0.0259 lower at $2.1175. The 20-day and 100-day moving averages are $2.0675 and $1.8755, respectively. The 14-day RSI is 60.42%.

Gasoline

  • The U.S. Department of Transport reported that driving data last week was seen near pre-pandemic levels of 2019.
  • The July RBOB contract is trading $0.0244 lower at $2.1878. The 20-day and 100-day moving averages are $2.1559 and $1.9709, respectively. The 14-day RSI is 55.84%.

Propane

  • Prices continue to trend higher in the propane market despite fundamentals that point to a more bearish sentiment. The market seems to be brushing off the last two weeks of inventory builds and also a decrease in exports.
  • At last look, Conway propane was down $0.00250, trading at $0.94750. Mt. Belvieu was down $0.00250, trading at 0.95250.

Natural Gas

  • Natural gas futures continue to see further upside potential as demand grows across Asia. China was seen importing a new record for the month of May as economic growth continues.
  • The July Natural Gas contract is trading $0.108 higher at $3.257. The 20-day and 100-day moving averages are $3.060 and $2.902, respectively. The 14-day RSI is 68.52%.
As of 8:15 AM CST   WTI JulyULSD JulyRBOB JulyNat Gas July
CONTRACT HIGH71.002.31752.21704.720
RESISTANCE70.002.14142.21703.200
PREVIOUS CLOSE70.292.14342.21223.149
GLOBEX-CURRENT70.472.11752.18793.257
SUPPORT65.432.10002.12233.000
CONTRACT LOW6.500.67240.51891.521