Outlook: Energies are rebounding today after 3 consecutive days of losses. The IEA released a report and believes the supply disruption due to the war will largely outpace any demand destruction from high prices next month. Both Russia and Ukraine have denied progress following reports of a neutrality plan that surfaced yesterday. In the US we saw another net draw of 5.5 million barrels of petroleum products which includes another draw in the Strategic Petroleum Reserve. Overall, it’s a bullish campaign today with oil and products seeing significant gains. There are still bearish elements in the headlines with covid cases surging which could affect global demand if lockdowns continue overseas. The market will continue to monitor tightening supplies and look for any signs of replacing Russian oil.
- The IEA released a report stating 3 million bpd of Russian oil and products could be shut in from next month.
- The IEA believes oil demand will grow at a pace of 2.1 million bpd, down 2.2% from their previous forecast of 3.2 million bpd.
- A Kremlin spokesperson along with President Zelensky denied reports of major progress in negotiation talks between Russia and Ukraine according to Bloomberg.
- Covid cases continue to surge in Asia and South Korea causing lockdowns in various cities.
- The Fed announced an interest rate hike of one-quarter of a percentage point which was in line with expectations.
- The EIA reported a draw of 1.9 million barrels in the Strategic Petroleum Reserve.
- The EIA reported a build in crude stocks of 4.3 million barrels.
- As of 9:33 am CST: Brent crude oil up $7.19 to $105.25, US dollar index down $0.424 to 98.190 while the nearby e-mini S&P 500 futures contract is up 5.50 to 4363.50.
- ULSD futures are screaming higher today with nearby April up more than 33 cents to 3.4321. We are off the high of 3.4833, a price level that corresponds to the 9-day moving average.
- Yesterday the EIA reported a weekly build in US diesel stocks of 300,000 barrels.
- Diesel stocks are 22.1 million barrels below the 5-year average.
- RBOB is lagging in percentage terms compared to WTI and ULSD but is nearly 18 cents higher to 3.1617.
- The EIA reported a draw in gasoline stocks of 3.6 million barrels.
- Gasoline demand for the last four weeks is up 8.55% compared to last year.
- Conway is up 4.25 cents trading at $1.3025 and Belvieu is up 5 cents at $1.3200.
- Yesterday the EIA reported a weekly draw of 2.2 million barrels in propane stocks.
- Inventory values are around 2 million barrels below the 5-year low for the current time period.
- Yesterday, the US Department of Energy authorized requests for increased LNG exports from the US amid concerns around gas disruptions within Europe.
- Overnight weather runs added 6 HDDs through the two-week forecast.
- Total US demand fell for the 4th consecutive day by 4.8 Bcf/d.
- The EIA is expected to report a draw of 70 Bcf.
Oil Producer Break-even: The majority of oil producers in the US produce oil and natural gas. Tightening natural gas and elevated prices are providing extra revenue on top of higher oil prices to lower breakeven levels. BNEF estimates higher natural gas prices have lowered breakeven oil price by an average of 9 dollars per barrel.