Outlook: Energies are seeing a pullback across the board today fueled by profit-taking and the dollar index reaching a 2 year high. Despite the losses across the complex, energy headlines remain bullish. Oil production remains a long-term concern with OPEC+ slipping to 154% compliance of their production cut last month. This struggle looks to continue with Libya experiencing around half a million barrels per day disruption due to political protests. Sanctions against Russia are proving to disrupt their revenue stream with an estimated $181 million dollars lost due to a drop in exports last week. This number will grow if the European Union moves forward with an embargo on Russian energy. This proposal has been drafted, but the details regarding the pace at which they’d move away from the product remain unknown. This will be a significant market mover if they move swiftly against their largest supplier and we could see another significant jump in volatility due to the magnitude of supply being disrupted.
Crude
- OPEC+ has produced 1.45 million bpd less oil than allowed by the production restraint agreement.
- Libya’s oil production dropped to around 800,000 bpd down from 1.3 million bpd reported on Friday.
- Russian oil exports were down by 25% last week according to Bloomberg.
- Due to the loss of exports Russia lost $181 million dollars last week when compared to regular export flows.
- A cargo of US SPR has departed from a Texas port heading for Europe.
- JP Morgan says oil may hit $185 if the EU steadily bans Russian oil.
- WTI open interest once again dipped to its lowest level since 2016.
- The US dollar has hit 2-year highs reaching $101.022 overnight.
- Reuters is estimating a 2.5 million barrel build in crude stocks for last week.
- The API will report their inventory survey at 3:30 CST.
- As of 9:10 am CST: Brent crude oil down $3.80 to $109.36, US dollar index up $0.060 to 100.841 while the nearby e-mini S&P 500 futures contract is down 42.25 to 4428.00.
Diesel
- Reuters is estimating a 900,000 barrel draw in diesel stocks for last week.
- The diesel crack spread continues to climb to $55.39 with crude losses outpacing diesel today.
Gasoline
- European gas arrivals in the US gained by 62% week-over-week.
- Reuters is estimating a 1 million barrel draw of gasoline stocks for last week.
Propane
- Conway is trading at $1.3300 and Belvieu is trading at $1.3800.
- The propane forward curve remains backwardated where more favorable prices can be locked in for deferred months.
Natural Gas
- Total US demand rose by 2.3 Bcf/d yesterday to 95.4 Bcf/d.
- Overnight weather runs were relatively flat for the two-week forecast.
- Reuters estimates a build in stocks between 30-36 Bcf for last week.
NG Forward Curve: Natural gas has seen a substantial shift in its forward curve over the last month. The US announced efforts to increase production and exports to aid Europe in its transition away from Russian supply and we’ve seen NG set new contract highs throughout the curve.
