Outlook: The energy complex has fallen slightly this morning as concerns over global demand have pressured futures lower. Refineries in India are planning to scale back crude processing as rising Covid-19 cases are likely to cause a drop in demand. The country reported its worst daily death toll from Covid-19, and large parts of the nation are now back in lockdown to help slow the spread of the virus. India is the world’s third-largest oil consumer behind only the U.S. and China. Adding further downside pressure is the news that discussions between the U.S. and Iran are continuing to progress. The U.S. is holding indirect discussions with Iran in order to attempt to revive the 2015 nuclear accord. By all accounts, negotiations have been positive, but striking a deal is likely going to take some time. If the nuclear agreement were to be reinstated, Iran would stop its nuclear program, and U.S. sanctions would be lifted. Iran has the capacity to produce about 4 million bpd of crude oil, while they currently produce about 2.35 million bpd. Equities are bouncing back after a steep sell-off yesterday. The DJIA and the S&P 500 are trading in positive territory, while the Nasdaq Composite is just below even.
Crude
- Rystad Energy, which is Norway’s largest energy consultancy, stated today that world oil demand will peak in 2026. They forecast demand to peak at 101.6 million bpd in 2026, which is down from an estimate in November which predicted global demand would peak in 2028 at 102.2 million bpd. The company cited the rapid adoption of EV’s and the electrification in the transportation sector as the reason for the adjusted outlook.
- The Reuters poll of traders and analysts is estimating that the EIA will report a 2.975 million barrel draw in U.S. crude oil stocks for the week ending April 16.
- Yesterday afternoon an industry group reported that U.S. crude oil inventories rose 436,000 barrels last week.
- Weekly mortgage demand increased for the first time since the end of February last week, as interest rates have fallen to a two-month low. Applications to refinance also jumped by about 10%, but were still down 23% when compared to the same time period the year prior.
- The June crude oil contract is trading $0.85 lower at $61.82. The 20-day and 100-day moving averages are $60.91 and $55.56, respectively. The 14-day RSI is 52.33%.
- As of 9:18 am CST: June Brent is down $0.71 at $65.86, the U.S. dollar index is 0.081 higher at 91.323, while the nearby e-mini S&P 500 futures contract is up 10.25 points at 4,136.75.
Diesel
- The May ULSD contract is trading $0.0177 lower at $1.8624. The 20-day and 100-day moving averages are $1.8263 and $1.6823, respectively. The 14-day RSI is 53.79%.
- Major oil trading companies such as Trafigura and Vitol are storing diesel and jet fuel on tankers in Asia in anticipation of higher prices due to stronger demand in the months ahead. Data from Analytics firms Vortexa and Kpler show the companies holding about 1.5 million tonnes of fuel on at least seven VLCC’s.
- The Reuters poll of analysts and traders is calling for the EIA to report a 956,000 barrel draw in U.S. distillate inventories for the week ending April 16.
- Yesterday afternoon an industry group reported that U.S. distillate stocks rose 660,000 barrels last week.
Gasoline
- The May RBOB contract is trading $0.0210 lower at $1.9964. The 20-day and 100-day moving averages are $1.9894 and $1.7679, respectively. The 14-day RSI is 51.12%.
- According to China’s National Bureau of Statistics, gasoline output in March from Chinese refineries rose 32.8% when compared to the year prior.
- The Reuters poll of analysts and traders is expecting the EIA to report a 464,000 barrel build in U.S. gasoline stocks for the week ending April 16.
- Yesterday afternoon an industry group reported that U.S. gasoline stocks fell 1.62 million barrels last week.
Propane
- Propane prices are moving lower this morning. At last look, Conway propane was down $0.0150, trading at $0.6850. Mt. Belvieu was down $0.0050, trading at $0.7300.
- According to an OPIS survey of analysts and traders, U.S. propane inventories are likely to have risen by 500,000 barrels in the week ending April 16.
- The IHS Markit estimate is calling for the EIA to report a 1.241 million barrel build in propane stocks last week.
Natural Gas
- The May Natural Gas contract is trading $0.036 lower at $2.691. The 20-day and 100-day moving averages are $2.608 and $2.682, respectively. The 14-day RSI is 53.96%.
- Natural gas futures values have dipped once again this morning, as warmer weather is expected to reduce demand. Average exports this month have fallen slightly but are still at an all-time high pace at 11.0 bcfd.
- Tomorrow morning the EIA will release its Weekly Natural Gas Storage Report.
