Outlook: Energies are seeing a subtle rebound following yesterday’s selloff. A larger than expected release of global SPR by the IEA combined with a bearish EIA inventory report helped push markets through nearby technical support levels. Overall, the market has taken a bearish tone with the temporary supply relief however the long-term outlook remains bullish. If Russian production continues to show signs of retreat, it will signal greater demand for oil to be replaced in its absence. OPEC members Saudi Arabia and the UAE combined with Iran re-entering the market could replace 92% of Russian barrels consumed globally according to BNEF. While it seems close on paper, this would erase a large portion of OPEC’s spare capacity and leave little room for additional supply disruption. This also does not account for growing global demand which was putting pressure on supply prior to the war. Additional investment in energy production will be a key factor globally for the long-term outlook, and producers will need reassurances that they will continue to have a place in the market.
Crude
- Russia pumped an average of 10.52 million bpd from April 1-6 which would represent a 500,000 bpd drop in production if maintained compared to March.
- The IEA announced they will release an additional 60 million barrels of global SPR yesterday.
- Nearby crude closed below the 50-day moving average yesterday for the first time since early January.
- OPEC increasing production to utilize spare capacity along with IEA demand curb estimates would fall 600,000 bpd short of replacing Russian Oil according to BNEF.
- BNEF estimates US production will reach 13.4 million bpd by December 2023.
- The EIA reported the SPR stocks fell by 3.7 million barrels.
- The EIA reported crude stocks rose 2.4 million barrels last week.
- As of 9:25 am CST: Brent crude oil up $0.43 to $101.57, US dollar index up $0.036 to 99.635 while the nearby e-mini S&P 500 futures contract is down 9.00 to 4466.00.
Diesel
- The EIA reported diesel stocks rose 771,000 barrels last week.
- Implied diesel demand fell 35,000 barrels last week.
Gasoline
- The EIA reported gasoline stocks fell 2 million barrels last week.
- Implied gasoline demand rose by 434,000 barrels last week.
Propane
- Conway is off 3 cents trading at $1.2550 and Belvieu is off 2.5 cents trading at $1.2750.
- Propane inventories rose 660,000 barrels last week.
- Propane exports rose 140,000 barrels last week.
Natural Gas
- Total US demand increased by 0.1 Bcf/d yesterday to 92.7 Bcf/d.
- Overnight weather runs added 2 HDDs from the two-week forecast.
- The EIA is expected to report a 27 Bcf draw for last week.
Daily CL: After a bearish news day yesterday, crude managed to settle below the 50-day moving average for the first time since early January. Continued trade below this level could signal a change in the current market trend.
