Outlook: Energies are looking for direction this morning but are on pace for their second consecutive weekly loss. A bearish tone has taken control over the marketplace despite the war and supply disruption occurring from it. There are reports that Russia is staged for another full-scale attack on eastern Ukraine which could bring on more sanctions. However, as long as sanctions don’t include energy, they will continue to have a lesser influence on energy prices. China’s covid lockdown continues to be extended and we’re seeing a significant impact to demand. This loss of demand coupled with 1.3 million bpd of global SPR relief has helped pressure markets and has crude trading below its 50-day moving average for the first week since early January. The SPR release will provide short-term relief, but the long-term outlook remains bullish. We are seeing some of the backwardations for crude and products work towards a flatter tone following the downward pressure in the nearby months.
Crude
- Reports suggest Russia has geared up for another full-scale attack on eastern Ukraine following their recent pullback.
- China reported over 20,000 new covid cases on Wednesday according to Bloomberg.
- Bloomberg reports China has already lost 1.2 million bpd of fuel demand
- Oil is set for its second weekly loss.
- JP Morgan believes the global SPR release of 1.3 million bpd will temporarily offset the 1 million bpd of Russian output that they believe will be permanently offline.
- US Congress voted to ban oil, natural gas, and coal imports. They also removed Russia’s Permanent Normal Trade Relations status, which allows tariffs to be established.
- Baker Hughes will report rig counts at 12:30 CST.
- As of 8:55 am CST: Brent crude oil up $0.23 to $100.81, US dollar index up $0.400 to 100.151 while the nearby e-mini S&P 500 futures contract is down 26.00 to 4470.00.
Diesel
- Half of China’s demand loss is attributed to jet fuel demand and only 10% of planned flights were completed on Thursday according to Reuters.
- Crack spreads continue to favor diesel with the diesel crack at $41.41 vs gas at $31.88.
Gasoline
- 36 refiners have applied for exemptions from biofuel requirements which could be a positive for gas prices.
- AAA national average gas price at the pump is $4.139.
Propane
- Conway is down 2 cents trading at $1.2450 and Belvieu is down 1.5 cents trading at $1.2650.
- Nearby propane has fallen ~15 cents this week supported by inventory builds.
Natural Gas
- Total US demand increased by 3.2 Bcf/d yesterday to 96.7 Bcf/d.
- Overnight weather runs added 6 HDDs from the two-week forecast.
- The EIA reported a draw of 33 Bcf yesterday.
Global Refiners: Global refinery outages reached 3.45 million bpd as of April 7, compared to 3.33 million bpd a week earlier. Outages in the US were 406,000 bpd and 753,000 bpd in Russia.
