Outlook: The energy complex has pushed higher this morning as improved demand forecasts have helped buoy futures values. Despite the dramatic rise in Covid-19 cases in India, Japan, and Turkey, effects on global demand are not expected to last long-term. The OPEC+ Joint Technical Committee met earlier this week, where they stated the group's global demand forecast was unchanged. The group expects global oil demand to increase by nearly 6 million bpd this year. They also project that global inventories will reach 2.95 billion barrels by July, which would put stocks below the 2015-2019 average. Analysts at Citi have stated that the market is closer to equilibrium than OPEC+ is suggesting, as the bank expects global demand to reach a record high of 101.5 million bpd this summer. Strong economic data and a blowout earnings report from Apple are likely adding a layer of support to the energy complex as well. U.S. first quarter GDP increased at a 6.4% rate, which marks the second-fastest pace for growth since 2003. The all-time high was set in Q3 of 2020 which was fueled by reopenings following broad lockdowns throughout the country. First-time claims for unemployment also set a pandemic low but were slightly above industry expectations. Yesterday afternoon Apple reported 54% revenue growth while also announcing a $90 billion share buyback plan. Equities have responded mostly positively, as the S&P 500 has hit an intraday all-time high. All three major averages were trading above even earlier in the session, but the DJIA has since traded both sides.
Crude
- This morning the U.S. Department of Labor reported that first-time claims for unemployment insurance totaled 553,000 last week. That is the lowest level achieved during the pandemic. Economists polled by Dow Jones anticipated 528,000 first-time claims. The unemployment rate has fallen from the pandemic high of 14.7% to around 6% currently.
- According to a statement from New York City Mayor Bill de Blasio, the city will fully reopen on July 1. Restaurants, bars, gyms, hair salons, and arenas will open at full capacity. The most recent CDC data states that 36% of the adult population in New York City has been fully vaccinated thus far.
- The explosion of Covid-19 cases in India will lead to a significant drop in demand for oil, which will lead to a supply glut, according to Rystad Energy. Analysts at Rystad predict that global demand will fall by 575,000 bpd in April, and 915,000 bpd in May. India is the third largest consumer of crude oil in the world, behind only the U.S. and China.
- The June crude oil contract is trading $0.90 higher at $64.76. The 20-day and 100-day moving averages are $61.63 and $56.58, respectively. The 14-day RSI is 61.71%.
- As of 9:57 am CST: June Brent is up $1.05 at $68.32, the U.S. dollar index is 0.128 higher at 90.737, while the nearby e-mini S&P 500 futures contract is up 5.00 at 4,181.25.
Diesel
- The May ULSD contract is trading $0.0197 higher at $1.9538. The 20-day and 100-day moving averages are $1.8584 and $1.7125, respectively. The 14-day RSI is 66.03%.
- Yesterday the EIA reported that U.S. distillate inventories fell 3.340 million barrels in the week ending April 23. Distillate demand rose 476,000 bpd as well, increasing to 4.330 million bpd. As we’ve mentioned previously, low distillate inventories in the Midwest, along with what is expected to be strong demand due to a robust planting and harvest season, will likely push basis values above seasonal averages.
Gasoline
- The May RBOB contract is trading $0.0153 higher at $2.0857. The 20-day and 100-day moving averages are $2.0033 and $1.8042, respectively. The 14-day RSI is 62.10%.
- According to a report from the International Energy Agency, the number of electric vehicles on global roadways is expected to reach 145 million by 2030. The report stated that roughly 3 million new electric vehicles were registered in 2020, which is a 41% increase when compared to 2019. The IEA stated that if global governments ramp up their efforts to meet international climate goals, the electric fleet could reach 230 million by 2030.
Propane
- Propane prices are moving higher this morning. At last look, Conway propane was up $0.0350, trading at $0.8000. Mt. Belvieu was up $0.0600, trading at $0.8650.
- Yesterday the EIA reported that U.S. propane inventories rose 485,000 barrels in the week ending April 23. The propane demand versus exports dynamic will be something to keep an eye on going forward. U.S. demand for propane rose 470,000 bpd to 1.149 million bpd, but that increase in demand was more than matched by a 504,000 bpd drop in exports.
Natural Gas
- The June Natural Gas contract is trading $0.064 lower at $2.896. The 20-day and 100-day moving averages are $2.744 and $2.749, respectively. The 14-day RSI is 63.27%.
- This morning the EIA released its Weekly Natural Gas Storage Report. They showed that working gas in storage rose 15 Bcf in the week ending April 23. Natural gas stocks are 302 Bcf less than last year at this time, and 40 Bcf below the five-year average.
U.S. first-quarter GDP increased at a rate of 6.4%. Economists surveyed by Dow Jones anticipated a 6.5% increase. Q4 of 2020 showed a 4.3% increase. Consumers accelerated spending by 10.7% in Q1, compared with a 2.3% increase in Q4.
