Morning Highlights
Morning Highlights

4-11-22 Energies trade lower on Chinese Virus


Michael Dix

Apr 11, 2022

 

 

Outlook: Energy markets are trading lower as Chinese lockdowns expand and lengthen. OPEC and EU leaders are trying to work out a way that the oil-producing coalition can increase production. Releases from strategic reserves have not made increased production extremely attractive despite high prices. Natural gas set new contract highs all the way out to Jan 2024. This comes as the US is building export facilities and is attempting to assist in the European natural gas shortage.

Crude

  • Chinese demand is being hit by a spreading coronavirus outbreak
  • Covid lockdowns continue to spread and lengthen in China
  • Iran says the nuclear deal is hanging on the US’s decision on whether to move forward or not.
  • Russian energy exports are facing more logistical challenges as they must ship the goods further away.
  • EU officials are meeting with OPEC leaders as they discuss potential increases in production as Europe tries to wean themselves off of Russian crude oil.
  • Despite global demand increasing since the war started West Africa is still struggling to find a place to sell their crude oil.
  • The last of the granted Russian crude vessels that were bought before the sanctions were placed will arrive this week.
  • US oil rigs rose 13 units last week to their highest since April of 2020
  • As of 8:58 am CST: Brent crude oil is down $4.26 to $98.75, US dollar index is up $.166 to 99.951 while the nearby e-mini S&P 500 futures contract is down 32 to 4450.00

Diesel

  • Diesel stocks continue to make diesel the tightest energy market, with levels dipping well below the five-year average
  • According to TSA checkpoints travel is back to within pre-pandemic levels.

Gasoline

  • The US refinery rate is at 92.5% which is providing downward pressure on gas, whose inventories are still in line with the five-year average.
  • $3 is acting as a strong support resistance for the time being.

Propane

  • Propane prices have moved below the 40-day moving average and are expected to follow fundamentals heading into the build season
  • 49% of production is currently being exported.

Natural Gas

  • The GFS gained 8 HDD’s
  • Nat gas contracts set contract highs this morning out to the Jan 24 contract.

Dailey Crude: When the war started prices escalated. However, despite the war continuing the war premium has slipped out of the market. The news from China on covid is having an impact, but I do not think that it should have offset that premium.