Outlook: The energy complex is trading higher this morning as it bounces back from losses late last week. Geopolitical tensions are rising yet again as Russia has not scaled back its invasion and in many ways has increased in brutality. There was a fuel depot destroyed in Russia by Ukrainian forces last week. In response, Russia bombed a refinery and storage facility in Odesa. The United States has accused Russia of using its drawback as an opportunity to regroup and attack in different locations across Ukraine.
Crude
- Russian forces bombed Odesa energy facilities in Ukraine, including an oil refinery.
- Caspian oil pipeline loadings down by 11% in April
- European countries are reducing power consumption by lowering thermostats and keeping lights off in an effort to reduce the pain of Russian energy withdrawal
- Russian monthly oil production dropped for the first time in 7 months. The decrease is about 50,000 bpd
- Chinese oil demand estimates showed that demand was down somewhere between 600,000 and 1.2 million barrels.
- Last month OPEC+ was producing at 150% of compliance as Nigeria fell short 100,000 bpd and Libya fell short 50,000 bpd
- With last week’s Rig count the US has increased rigs 20 months in a row
- As of 9:17 am CST: Brent crude oil is up $3.44 to $107.80, US dollar index is down $0.308 to 98.930 while the nearby e-mini S&P 500 futures contract is down 7 points to 4547.50.
Diesel
- The April may spread has firmed up as of late before widening slightly today.
- Supplies are still in very short supply in the US
- An Odesa refinery has reportedly been destroyed along with 3-4 storage facilities
Gasoline
- As Chinese demand decreases gas continues to lose support
- Gasoline stockpiles have not fallen like diesel and crude stocks have.
- Managed money trader’s net long positions dropped by 3,311 contracts to a total of 55,026 longs
Propane
- Propane started the morning lower as other energies traded higher.
- Last month’s average trading range was 5 cents per day.
Natural Gas
- The market is weighing the effects of a nat gas pipeline shut off to Europe by Russia
- Last week’s rig count increase of one gas rig pushed the number of rigs operating to its highest since 2019
Crude Backwardation: As the White House announced SPR draws the nearby market took a hit and the deferred moved higher. The loss of backup supply has traders concerned about long term access especially if production cannot meet demand. An SPR draw is being viewed as a short-term fix to a long-term problem. Last week we saw a $39 backwardation, today we are seeing $31.
