Outlook: Energies are sharply lower this morning following reports that Russia is pulling troops away from the border. Russia has also expressed willingness for a diplomatic approach to avoid an invasion. There has been a lack of proof of the measures being taken but the market is seeing a large sell-off on the claims with crude down over 4 dollars. Russia still looks for concessions from NATO and Ukraine and military threats will remain a negotiating tactic if troops hold positions on the border. A sanctioned embargo of Russian oil would put additional stress on an already tight supply situation and energies will continue to be hypersensitive to the situation until it resolves.
Crude
- Russia has reported its pulling troops away from the border.
- There is no evidence as to how many troops, how far they’re pulling back, or if they are pulling back at all as of now.
- Russian Foreign Minister Sergei Lavrov spoke to his Iranian counterpart on Monday and noted a “tangible move forward” in reviving the nuclear deal.
- Citigroup reports that 500,000 bpd would hit the market from Iran in April-May if the nuclear deal was revived.
- US Permian oil production will hit another record next month at 5.06m bpd, according to the EIA’s Drilling Productivity Report.
- US oil production is estimated at a record level of 12.6m bpd in 2023.
- The US Producer Price Index rose 1% m/m in January, above the consensus estimate for a 0.5% increase. It rose 9.7% y/y, above a consensus estimate of 9.1%.
- The API will report inventory data at 3:30 CST.
- Reuters is calling for a crude draw of 1.8 million barrels. Yesterday Genscape fly-over data suggests Cushing, OK crude inventories fell 1.7 million barrels w/w to 28.785 million barrels.
- As of 9:00 am CST: Brent crude oil down $3.96 to $92.52, US dollar index down $.186 to 96.189 while the nearby e-mini S&P 500 futures contract is up 51.5 to 4445.50.
Diesel
- A Reuters poll suggests US distillate stocks may have fallen 1.2 million barrels last week.
- Increasing jet fuel demand may continue to pressure diesel inventories.
Gasoline
- Reuters is estimating a US gasoline build of 600,000 barrels occurred last week.
- As Omicron continues to moderate, gasoline stocks shifted into a year-over-year deficit again.
Propane
- Propane closed yesterday with Conway up 0.5 cents and Belvieu down 0.25 cents
- Markets may be less weather-sensitive with the end of winter approaching.
Natural Gas
- Total US demand fell by 2.2 Bcf/d yesterday for the first time in 3 days.
- This week’s overnight weather runs added 5 HDDs through the next two weeks.
- EIA February Drilling Productivity report forecasted total gas production will climb by 0.49 Bcf/d to 91.7 Bcf/d in March.
US Production: US shale continues to recover from the pandemic. The pandemic forced many US producers to extensively cut costs in order to survive the abnormal market conditions. These leaner producers are now profiting more than ever compounding with high prices and are able to push production to new levels.
