Outlook: Energies are trading higher today rebounding from yesterday’s sell-off. The long-term trends still maintain a bullish direction which is helping dampen the downward moves we have seen. The lockdown we are seeing in China is a serious concern to demand and the outlook isn’t getting any better. With cases growing in Beijing, an additional major city shutting down could be enough to alter the short/mid-term trend. Comparatively to the pre-war momentum in the market, we have already seen the trend turn more lateral in crude. Products remain more supported with both exports and domestic demand continuing to climb. The US will look to release an additional 1 million bpd from the SPR starting next week and over the next 6 months. This release will buy time for the US to further ramp up crude production and find alternatives for displacing Russian supply loss on the global market.
Crude
- Beijing will attempt to covid test 22 million citizens as covid cases in China continue to rise.
- The US Energy Secretary suggests that increases in US oil production will reach levels to offset the current loss of 1.5 million bpd of Russian supply.
- Economy Minister Robert Habeck says Germany already cut its reliance on Russian oil enough to make an embargo manageable.
- Kazakhstan has returned to its original oil production of 1.76 million bpd after the CPC oil terminal resumed loadings following finishing repairs.
- The US delivered a 2 million gallon supertanker of crude oil to Spain for the first time in over 6 years as Europe’s demands shift away from Russian supply.
- The world’s 5 largest international oil companies are set to post a total net income of $34 billion according to Bloomberg. This would be the highest net income since 2011.
- Reuters estimates crude stocks rose by 2.2 million barrels last week.
- The API will report their inventory survey at 3:30 CST.
- As of 9:25 am CST: Brent crude oil up $1.80 to $104.12, US dollar index up $0.294 to 100.046 while the nearby e-mini S&P 500 futures contract is down 67.50 to 4226.00.
Diesel
- Reuters estimates diesel stocks fell by 600,000 barrels last week.
- The 1st-2nd month price gap in heating oil has climbed over 50 cents setting a record spread level.
Gasoline
- Reuters estimates gasoline stocks rose by 500,000 barrels last week.
- AAA reports the national average gas price at $4.131
Propane
- Conway is trading at $1.2350 up 1.5 cents and Belvieu is trading at $1.2725 up 1.75 cents.
- Propane continues to track the movements in crude oil.
- The US is currently exporting 49.6% of its production.
Natural Gas
- Total US demand grew by 3.8 Bcf/d yesterday to 87.1 Bcf/d.
- Overnight weather runs added 1 TDD for the two-week forecast.
- Reuters estimates an inventory injection between 20-43 Bcf.
Daily Crude: With the resurgence of covid in China we have seen crude slowly shift to a more lateral short-term trend. The demand loss from lockdowns continues to push us below the 50-day moving average. The 100-day moving average is slowly making its way back to relevance at $91.21and could provide support if we see the lockdown spread to Beijing.
