Outlook: Energies are pulling back this morning after establishing new contract highs in the overnight trade. WTI managed to hit $116.54 which bypassed 2011 highs of $115 and compares to 2008 levels. The market continues to navigate the world supply situation as the Russian invasion has slowed. The second round of talks between the two countries can be seen as optimistic, however, it was noted that no progress was made during their first meeting. The US has expressed that direct energy sanctions remain on the table if the invasion continues, which will likely result in high casualties with a mass of Russian forces on Kyiv’s doorstep. Behind the geopolitical spotlight, the fundamentals of the market are still very bullish as the EIA reported another net draw of petroleum inventories in the US. Federal Reserve Chair Jerome Powell will testify this morning as inflation remains at record levels. Powell has said they are leaning towards a quarter-point increase in interest rates.
Crude
- WTI set a new contract high of $116.57 overnight but has pulled back to $109.54
- The second round of talks is set between Russia and Ukraine today in Belarus. No progress was reported from their first meeting on Monday.
- The US announced sanctions on the Russian oil refining sector which targets tech to prevent them from modernizing its oil refineries.
- The sanctions exempt oil and gas exports, however, the US says it’s still on the table.
- Rystad Energy and Energy Aspects estimate between 1 – 3.5 million barrels of Russian exports are disrupted due to monetary sanctions and port uncertainty.
- The International Atomic Energy Agency Director will travel to meet Iranian leaders Saturday to investigate Iran’s nuclear activities and talk about resurrecting a new deal.
- OPEC+ maintains their 400,000 bpd output increase for April.
- The EIA reported a draw of 2.6 million barrels following Reuters estimate of +2.7 million barrels and an API survey of -6 million barrels.
- Federal Reserve Chair Jerome Powell will testify before Congress to provide a broad overview of the economy and monetary policy at 9:00 cst.
- As of 8:48 am CST: Brent crude oil down $1.28 to $111.70, US dollar index up $0.164 to 97.551 while the nearby e-mini S&P 500 futures contract is up 24.25 to 4405.50.
Diesel
- The EIA reported a draw of 600,000 barrels for last week.
- Diesel inventories are 16% below seasonal averages.
Gasoline
- The EIA reported a draw of 500,000 barrels for last week.
- Gasoline inventories are 1% below their season average.
Propane
- Propane saw a smaller than expected draw of 848,000 barrels for last week.
- Conway is trading at $1.5050 and Belvieu is trading at $1.5450.
Natural Gas
- The EIA is expected to report a 137 Bcf draw today.
- Overnight weather runs added 6 HDDs through the two-week forecast.
- Total US demand fell by 3.2 Bcf/d yesterday and represents the fifth consecutive day of losses.
Global Driving: The change in average miles traveled has returned to pre-covid levels as gas prices surge all over the country. With energy prices continuing to climb, there is question where demand destruction will occur. We likely won’t see a decline as we did due to covid, but prices may climb high enough to stall demand momentum.
