Morning Highlights
Morning Highlights

Russia Shuts Off Natural Gas Flows 4-27-22


Michael Dix

Apr 27, 2022

 

Outlook: Energies are trading lower to start the morning with natural gas being the exception. Russian Natural gas to Poland and Bulgaria was shut off this morning. Europe appears to be moving closer to an embargo on Russian oil. The oil market continues to trade above $100 as the market waits on news of Chinese Covid updates. There are hints that Shanghai will ease its lockdowns and reports that other areas of China are seeing a flattening of cases. Long term I am still seeing prices increase unless the shortage of supply can be solved.

Crude

  • Russia estimates that its crude production will be down 17% this year due to logistical challenges that have arisen due to sanctions.
  • Protesters shut off oil pipelines in Germany in protest of its North Sea drilling.
  • Germany has come out to say that a full embargo on Russian energies is possible. They had earlier been one of the staunchest opponents of an embargo.
  • Shanghai is starting to ease some of its lockdown procedures. Beijing saw the number of positive cases stabilize.
  • Mexican oil exports rose 67% last month. All of Latin America is seeing a boom in exports as the world shuns Russian products making every type of commodity shipping more challenging.
  • The EIA report is scheduled to be released at 9:30 this morning. The API is expecting a 4.78 million barrel build in crude. Reuters is predicting a 2 million barrel build.  
  • As of 9:05 am CST: Brent crude oil is down $1.27 to $103.72, the US dollar index is up $.695 to 102.993 while the nearby e-mini S&P 500 futures contract is up 28.5  to 4199.25

Diesel

  • Despite trading lower this morning, diesel has continued its push higher recently as expectations grow of an embargo on Russian oil.
  • Jet fuel continues to set refinery margin records daily.
  • The API is expecting a build of 431,000 barrels while Reuters predicts a 300,000 barrel draw

Gasoline

  • Gas production should be in full swing worldwide as Asian refiners are seeing record-setting margins.
  • Despite record level margins supply is in question due to the potential switch to more diesel output due to the even higher margins in distillates.
  • The API is expecting a 3.9 million barrel draw. Reuters poll predicted an 800,000 barrel build.

Propane

  • Conway is priced at $1.2400 and Belvieu is at $1.2850
  • Increased demand due to forward contracting has moved the market higher along with an overall supportive energy complex.
  • According to the OPIS poll the market is expecting a .4 million bbl to a 2 million bbl build in stocks.

Natural Gas

  • Russia cut off gas flows to Poland and Bulgaria. Both Countries had previously announced that they were not looking to renew their contracts with Russian-owned Gazprom.
  • European gas is still currently running at six times the price we see here in America.
  • Reuters projects a build ranging from 50 bcf to 20 bcf.

Chinese Congestion:  As of last Wednesday Chinese, traffic was lower than we have seen since the Shanghai lockdown. If lockdowns are eased the whole country could see traffic increase back to the March 1st level and possibly higher.