Outlook: Energies are mixed to start the morning with headlines pulling the market in both directions. The EU continues to contemplate a Russian oil embargo, while countries like Germany have jumped in line with self-sanction plans to eliminate Russian oil imports by the end of the year. Germany also said that natural gas will be soon to follow but that is a much steeper hill to climb due to their current reliance on the Russian supply. The US is racing to increase natural gas production and exports to help countries moving away from Russian supply which has supported the entire natural gas forward curve. Russian oil production is falling with its monthly average heading to 10 million b/d and its lowest level since September 2020 with further reductions ahead as western refiners walk away from expiring contracts. Tightening US inventories continue to be offset by surging inventories in Singapore where Chinese demand appears to have bottomed out.
Crude
- The EU and IEA are urging consumers to cut oil use amid Russia’s war in Ukraine.
- The EU seeks to cut oil use by 220 million barrels in an effort to replace Russian supply.
- Germany plans to stop importing Russian oil by the end of 2022 with natural gas soon to follow.
- Libya continues to see production disruptions of over 500,000 bpd.
- Total inventories of oil products grew by 6.8 million barrels in Singapore, representing the largest build since March 2008.
- Saudi Arabia denied reports that relations with the US are strained.
- Bad weather has again delayed the completion of repairs at the CPC terminal in Kazakhstan. 2 of 3 moorings are in operation and currently loading.
- The Nymex 3-2-1 crack spread hit its strongest level since 1986.
- The EIA reported crude inventories fell by 8 million barrels for last week.
- As of 8:25 am CST: Brent crude oil up $1.65 to $108.45, US dollar index down $0.264 to 100.126 while the nearby e-mini S&P 500 futures contract is down 39.50 to 4495.00.
Diesel
- The EIA reports a 2.6 million barrels draw in diesel stocks for last week.
- Flight cancellations for Chinese airports remain at 69% amidst the lockdowns.
Gasoline
- The EIA reported a 761,000 barrel draw in gasoline stocks for last week.
- Implied gas demand grew by 163,000 barrels for last week despite elevated prices at the pump.
Propane
- Conway is trading at $1.2800 and Belvieu is trading at $1.3125.
- The EIA reported a build of 1.6 million barrels for last week.
- The US is currently exporting 49.6% of its production.
Natural Gas
- Total US demand fell by 4.0 Bcf/d yesterday to 95.0 Bcf/d.
- Overnight weather runs were relatively flat for the two-week forecast.
- The EIA is expected to report a build of 31 Bcf.
3-2-1 Crack Spread: US refiners are seeing some of their biggest profits ever with crack spreads continuing to rise. The 3-2-1 crack rose to $45.67 on Wednesday recording its highest level since records go back to 1986.
