Outlook: Healthy volatility is occurring to the downside this morning with selling pressure coming from demand concern brought on by Delta-variant restrictions and an increase in OPEC+ shipments.
- China reported 61 Covid cases and 23 asymptomatic cases Tuesday. This number may be small, but the country has taken aggressive action in trying to stop further spread and those restrictions are causing concern about demand for gasoline and diesel and the crude oil used to make it. Beijing has told its residents not to leave the capital and flights are being cancelled.
- U.S. factory orders were up 1.5% in June m/m, above 1.0% anticipated and below 2.3% previous.
- Stocks of energy majors like BP have lagged in percentage terms to crude oil this year as investors remain guarded when looking at energy companies. While crude has gained 66% this year, European listed oil and gas companies have gained only 23%.
- BP increased its dividend and share buybacks as the company takes a more optimistic view of the oil market. CEO Bernard Looney said BP has a “more bullish” view on oil over the next 5-10 years due to projected supply constraints. He said BP does not plan to increase oil production investments in a higher oil price world.
- Last week’s drone attack that killed two people on an Israeli-backed tanker could make it harder for the U.S. and Western powers to come to an agreement with Iran on their nuclear program. The U.S. and Israel blame Iran for the attack and Iran has denied responsibility. Iran’s semi-official Nour News said a potential prisoner swap with the U.S. has been taken off the table due to “dirty behavior and continued promise breaking” by the Biden government.
- As of 10:08 am CDT: October Brent is $0.78 lower to 72.11, the U.S. dollar index is 0.070 higher at 92.118 while the nearby e-mini S&P 500 futures contract is unchanged at 4,379.75.
- Nearby September ULSD has traded a wide range between $2.0892 at its low and $2.1587 at its high. Current trade is down 2.58 cents to $2.1100.
- In the week ended July 30 US retail diesel prices rose 0.7% to $3.3670.
- Nearby September RBOB is 1.78 cents lower to 2.2575 with today’s high of 2.3033 and low of 2.2337.
- Gasoline imports into Indonesia, Southeast Asia’s largest importer, have fallen by nearly 25% due to virus restrictions.
- After two weeks of gains, US gasoline demand nudged about 1% lower to 9.541 million bpd in the week ended July 30, Descartes Labs said, based on movements of cellular devices.
- In the week ended July 30 US retail gasoline prices rose 0.5% to $3.0590.
- Spot propane in Conway is trading near $1.10 while Mont Belvius is positioned near $1.09.
- Considering the backwardated structure, end users may have interest in considering locking in inputs for next year. October 2022 Conway propane trades near $0.85.
Estimated oil shipments from June to July based on tanker tracking data: