Morning Highlights
Morning Highlights

4-20-22 Energies Bounce Back


Michael Dix

Apr 20, 2022

 

 

Outlook: Energies are bouncing back today after yesterday’s losses. Natural gas is the exception as it started out higher, but has moved lower as American traders got to their desks. Europe may look to put further sanctions and may even extend the sanctions to a ban on Russian oil and products following France’s election next week. If that happens it would displace 4 million barrels per day as there are very few logistical plans that could even start to remedy that type of disruption. OPEC has made it clear that they do not think the market needs more production. All this has combined to create a large bullish sentiment. JP Morgan estimates that this type of disruption could push oil well beyond all-time highs to $185 per barrel.

Crude

  • India continues to buy Russian oil at increasing rates.
  • There is speculation that the EU is moving closer to an embargo on Russian oil and products. If implemented JP Morgan estimates that prices could climb to $185 per barrel.
  • Russia has offered an expedited delivery plan for crude hinting at long-term trade issues to come.  Russia is now looking at a restructuring of how they receive payment for energy products.
  • Chinese oil imports from Russia are down 30% year over year.
  • Over 5 million Ukrainians have fled the country in the midst of the war.
  • Reuters expects a 2.5 million barrel build in crude. The API is expecting a 4.5 million barrel draw.
  • As of 9:00 am CST: Brent crude oil is up $.73 to $107.97, the US dollar index is down $.505 to 100.450 while the nearby e-mini S&P 500 futures contract is up 1 to 4460.00

Diesel

  • Reuters is expecting an 800,000 build in inventories. The API is predicting a 1.65 million barrel draw
  • Refinery rates were lower in last week’s report, and we expect a gain in utilization in this week’s report.

Gasoline

  • California pushed forward a bill to incentivize EVs and help drivers abandon their gas-powered vehicles in favor of more environmentally friendly methods of travel.
  • Reuters is expecting a 1 million barrel draw in stocks while the API is predicting a 2.9 million barrel build.

Propane

  • Propane is $1.28 in Conway and $1.3250 in Mt Belvieu
  • Propane stocks are expected to have a 705,000 bbl build in today’s report. Estimates saw a wide range from a 3 million bbl draw to a 2.2 million bbl build

Natural Gas

  • The flows of natural gas into Europe from Russia.
  • Warmer forecasts have tempered the rapid gains we saw late last week and Monday. There is a wide range of estimates for inventories, but the consensus is that we will see a build.

Russian Oil Production: Production in Russia is already taking a hit as sanctions make their impact. Currently, production sits just above 10 million barrels per day. With a possible EU ban on oil, that number could dip down to nearly 6 million barrels per day.