Outlook: The energy complex has pushed higher this morning as crude and products are all trading above even. Mixed and choppy trade has been experienced, however, as crude traded under $63 per barrel before moving into positive territory. A similar story can be told for front month RBOB and ULSD, as both June contracts have had wide trade ranges thus far today. Strong demand in the U.S. and China has helped buoy futures values. A lower dollar and strength in equities is likely contributing to the jump in the energy complex as well. Despite the robust demand outlook for the two largest crude oil consumers in the world, rapidly rising Covid-19 cases in India will likely crimp global demand in May. India reported more than 400,000 new cases on Saturday, with the seven-day average rising to just over 373,000 per day. India now accounts for 1 out of every 3 cases reported from a global perspective. India is the third largest crude oil consumer in the world. Analysts at Kpler have forecast that India’s crude oil imports could fall by 1.0 million bpd, with the potential for imports to dramatically fall even further, reducing by up to 3.0 million bpd in the coming weeks due to the explosion in Covid-19 cases and the potential for strict lockdowns. Equities are off to a strong start this morning as the DJIA has jumped over 300 points higher. The S&P 500 notched its third straight month of gains in April and is now up about 11% on the year. The DJIA rose around 2.7% in April, while the Nasdaq Composite gained nearly 5.5% last month.
Crude
- U.S. manufacturing activity grew at a record pace in April, according to the final reading for the U.S. Manufacturing Business Activity PMI Index. The Index was measured at 60.5, which is the strongest monthly improvement since data collection began in May 2007. A measure above 50 indicates an expanding sector, while a reading below 50 indicates a contraction.
- Iran’s chief nuclear negotiator stated on Saturday that the Iranian government expects U.S. sanctions on oil, banks, and most individuals and institutions to be lifted. The statement from Deputy Foreign Minister Abbas Araqchi comes as U.S. and Iranian officials are holding discussions in Vienna. U.S. State Department officials played down the prospects of a breakthrough in negotiations, however. The State Department stated that it is still unclear if a deal will be achieved.
- On Friday Baker Hughes released its weekly Rig Count Report. They showed that U.S. producers cut 1 oil rig, bringing the total down to 342. Despite the drop in rigs, the oil rig count is now up 17 when compared to the same time period in 2020.
- On Friday afternoon the CFTC released its weekly Commitments of Traders Report. They showed that funds and money managers sold 9,248 crude oil contracts in the week ending April 27. Funds are net long 533,971 lots.
- The June crude oil contract is trading $0.96 higher at $64.54. The 20-day and 100-day moving averages are $62.05 and $56.94, respectively. The 14-day RSI is 59.40%.
- As of 10:25 am CST: July Brent is up $0.94 at $67.70, the U.S. dollar index is 0.344 lower at 90.933, while the nearby e-mini S&P 500 futures contract is up 14.25 at 4,188.75.
Diesel
- The June ULSD contract is trading $0.0335 higher at $1.9559. The 20-day and 100-day moving averages are $1.8744 and $1.7232, respectively. The 14-day RSI is 63.25%.
- On Friday the CFTC released its weekly Commitments of Traders Report and showed that funds and money managers sold 4,904 heating oil contracts in the week ending April 27. Funds are now net long 5,246 lots.
Gasoline
- The May RBOB contract is trading $0.0381 higher at $2.1144. The 20-day and 100-day moving averages are $2.0177 and $1.8128, respectively. The 14-day RSI is 64.02%.
- China’s Labor Day was on May 1. Bookings for air travel, hotel rooms, and car rentals in the five-day holiday break surged above pre-pandemic levels. Congestion on the nation’s highways was expected to be about 10% higher than during the same time period in 2020.
- The CFTC released its weekly Commitments of Traders Report on Friday and showed that funds and money managers purchased 3,698 RBOB contracts, and are now net long 51,849 lots.
Propane
- Propane prices are moving lower this morning. At last look, Conway propane was down $0.0200, trading at $0.7700. Mt. Belvieu was down $0.0375, trading at $0.8000.
- The NOAA’s 6-10 day and 8-14 day weather outlook is calling for cooler temperatures for much of the northern half of the country. Cooler temperatures may boost demand for propane. The export/demand dynamic will be an important metric to follow along with going forward.
Natural Gas
- The June Natural Gas contract is trading $0.033 higher at $2.964. The 20-day and 100-day moving averages are $2.774 and $2.757, respectively. The 14-day RSI is 66.71%.
- The CFTC released its weekly Commitments of Traders Report on Friday and showed that funds and money managers sold 8,452 natural gas contracts. Funds are net short 58,605 lots.
According to the most recent CDC data, about 2 in 5 U.S. adults are now fully vaccinated. Nearly 45% of the country has received at least one dose of a Covid-19 vaccine. The U.S. is also averaging about 2.4 million inoculuations each day, based on the seven-day average. The seven-day average number of new Covid-19 cases in the U.S. fell below 50,000 for the first time since October.
