Outlook: The energy complex has fallen sharply this morning as crude and products are all trading well below even. The surge in cases of Covid-19 in India is pressuring the complex lower. According to energy consultant Kpler, India’s crude oil imports could fall by 1.0 million bpd, and up to 3.0 million bpd in the coming weeks to rising Covid-19 cases and suppressed demand. India reported over 386,000 new cases in the past 24 hours, with deaths caused by the virus jumping to nearly 3,500, according to health ministry data. CNBC previously reported that a lack of testing kits in the country has artificially lowered the actual number of cases in India, as health experts believe that actual case counts could be 5 to 10 times greater than the official report. Despite the steep sell-off in energy futures today, WTI is on track to gain about 10% for the month of April. Brent crude is on pace for about an 8% gain as well. Weakness in equities and a dramatically stronger dollar are also likely playing a part in the sell-off being experienced in energy. Amazon reported record high first quarter earnings, with profits more than tripling to $8.1 billion in Q1. Amazon earned $15.79 per share, while analysts on Wall Street expected the company to publish earnings of $9.54 per share. Despite the blowout report from Amazon, equities are all trading below even. The DJIA is down about 250 points, while the S&P 500 has dropped about 30 points.
Crude
- According to a Reuters survey, Iranian crude production rose 200,000 bpd in April. Iranian crude production now stands at around 2.5 million bpd. They have the capacity to produce around 4.0 million bpd, however, indicating that U.S. sanctions are still having quite a dramatic effect on capacity. April compliance from OPEC was measured at 123%.
- This morning the Chief Medical Officer at BioNTech, Dr. Ozlem Tureci, told CNBC that young children could be eligible for the Covid-19 vaccine before the end of the year. Last month Pfizer and BioNTech began a clinical trial that tested their vaccine on children 6 months to 11 years old. The data for children between the ages of 5 and 11 is likely to be collected by the end of the summer.
- This afternoon Baker Hughes will release its weekly Rig Count Report. Last week U.S. producers cut 1 oil rig, bringing the count down to 343. Oil rigs were down just 35 when compared to the year prior. It is likely today’s report will show the oil rig count being higher than last year at this time.
- This afternoon the CFTC will release its weekly Commitments of Traders Report. We’ll go into that data on Monday.
- The June crude oil contract is trading $1.74 lower at $63.27. The 20-day and 100-day moving averages are $61.75 and $56.75, respectively. The 14-day RSI is 55.86%.
- As of 10:25 am CST: June Brent is down $1.31 at $67.25, the U.S. dollar index is 0.619 higher at 91.230, while the nearby e-mini S&P 500 futures contract is down 27.00 at 4,176.50.
Diesel
- The May ULSD contract is trading $0.0488 lower at $1.9126. The 20-day and 100-day moving averages are $1.8632 and $1.7176, respectively. The 14-day RSI is 58.67%.
- The Dakota Access oil pipeline’s operators are planning to ask the U.S. Supreme Court to intervene to keep the pipeline working. Energy Transfer LP owns the 570,000 bpd pipeline. A key environmental permit was revoked earlier in the year, which will cause an environmental assessment to be undertaken. The assessment is unlikely to be finished before the end of the year. The pipeline can remain operational while the review is taking place.
- The current national average price for retail diesel fuel is $3.080 per gallon. Prices are unchanged from last week at this time but have risen dramatically when compared to the year prior. Last year at this time the national average price was $2.445 per gallon.
Gasoline
- The May RBOB contract is trading $0.0456 lower at $2.0543. The 20-day and 100-day moving averages are $2.0058 and $1.8105, respectively. The 14-day RSI is 56.61%.
- According to a Reuters report, Russia’s energy ministry has proposed banning gasoline exports for three months. Fuel prices in the country have been on the rise as of late, following a sharper recovery in demand. The average retail price of gasoline on April 26 was $0.64 per liter, up about 3.5% from the beginning of the year.
- The current national average retail price for gasoline in the U.S. is $2.895 per gallon, according to data from AAA. Prices have held mostly steady over the last week. Prices last year at this time averaged $1.772 per gallon.
Propane
- Propane prices are moving lower this morning. At last look, Conway propane was down $0.0125, trading at $0.7800. Mt. Belvieu was down $0.0150, trading at $0.8150.
- The NOAA’s 6-10 day and 8-14 day weather outlook are calling for cooler weather in the northern half of the country. Cold weather could bring some propane demand back into the market, which in turn may provide some support for hub values. We typically see inventories building during the spring and summer, which puts pressure on the downside for prices. We've yet to see a truly consistent build in inventories like we normally do, thanks in large part to strong exports. The demand/export dynamic will be one to continue to pay attention to.
Natural Gas
- The June Natural Gas contract is trading $0.021 higher at $2.932. The 20-day and 100-day moving averages are $2.756 and $2.752, respectively. The 14-day RSI is 65.38%.
- U.S. natural gas futures have hit a 9-week high this morning, as forecasts for cooler weather and record high exports are helping boost futures values. The amount of natural gas moving to U.S. export facilities has averaged 11.5 bcfd so far in April, which would top the all-time monthly high of 11.2 bcfd achieved in March.
- Yesterday 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.
The U.S. is experiencing its first true slow down in Covid-19 vaccinations, according to the most recent CDC data. The 7-day average number of inoculations has fallen to 2.6 million per day. More than half of the adult population has received at least one dose, and about 30% are fully vaccinated. Health experts have stated that to achieve herd immunity, about 80% of the population would need to be fully vaccinated.
