Outlook: Energies are pulling back from new contract highs overnight. WTI traded up to $94.94 overnight but has worked its way back to even this morning. The market will have a microscope to the Russia/Ukraine tensions this week as remarks from a Russian diplomat expressed interest in continuing talks against an invasion. Russia also remains optimistic that an Iran nuclear deal is close to completion however, Iran has pointed the finger at the US holding things up. The stage is set for a volatile situation where big swings could take place if the major market drivers move in the same direction. If Russia/Ukraine deescalates alongside the revival of the Iran nuclear deal, markets could see significant downside. On the bullish side, if Russia moves ahead with an invasion, crude will likely test $100 as sanctions will likely target Russia’s exports.
- President Putin spoke with President Biden over the weekend, but no progress was reported.
- Russia’s top diplomat Lavrov backs further diplomacy after the US offered missile deployment limits.
- Russia continues to reiterate progress being made with the Iran nuclear deal among world powers.
- OPEC+ members are uncertain how Russian barrels would be replaced in the market if sanctions are introduced.
- The IEA believes Saudi Arabia and the UAE could help balance the market if needed.
- The UAE energy minister believes geopolitical conflict won’t push OPEC+ to increase output as opposed to fundamental fuel shortages.
- OPEC+ Secretary-General expressed ongoing concern over underinvesting which is hindering members from reaching production targets.
- Asia ramped up buying from Russia in preparations for potential Russian sanctions.
- JP Morgan says tight oil markets could push prices to $125 in Q2.
- Baker Hughes added 19 oil rigs.
- As of 9:17 am CST: Brent crude oil up $.01 to $94.46, US dollar index up $.150 to 96.236 while the nearby e-mini S&P 500 futures contract is down 7.5 to 4404.50.
- Diesel reached a new contract high overnight of $2.9605.
- Despite soft airline demand and mild US temps, diesel stocks remain tight.
- Gas set a new contract high overnight of $2.7697
- As Omicron continues to moderate, gas stocks shifted into a year-over-year deficit again.
- Conway is down 1 cent to $1.225 and Belvieu is up .25 cents to $1.2375
- Warmer weather pushed hubs down ~4 cents last week.
- Total US demand rose by 23 Bcf/d over the weekend.
- This week’s overnight weather runs added 9 HDDs through the next two weeks.
Retail Gasoline: Efforts to reduce fuel prices have been unsuccessful as geo-political tensions push crude to 7-year highs and product inventories remain depleted. Driving demand is expected to increase as winter moves to its home stretch and more Americans will feel the pain at the pump.