Outlook: Crude is continuing on its sideways trend while products are seeing modest gains to start the morning. The two major stories of Russian supply and Chinese demand continue to sit at a stalemate and have had crude hovering around $100 for most of the week. An expansion of lockdowns in China could move the market off this trend, likewise with an EU embargo on Russian oil. OPEC is scheduled to meet next week and it’s anticipated they’ll continue with their modest increase of 432,000 bpd for June. OPEC continues to struggle to meet production targets and with outages in Libya for a portion of April, the pattern is set to continue. The May contracts are set to expire tomorrow for gas and diesel. The diesel contract remains under buying pressure with the prompt spread reaching 85 cents today.
- Germany is prepared to back a gradual ban on Russian oil.
- China’s biggest oil refiner is confident demand will recover by the end of Q2 and still reach full-year growth despite the lockdowns.
- Beijing has closed some public spaces and stepped up Covid check at others today in effort to avoid a full lockdown.
- OPEC indicated they will likely continue with their 432,000 barrel increase for June. They are set to meet next week.
- The US dollar index continues to climb which makes commodities priced in the currency less attractive.
- The EIA reported a 691,000 barrel build in crude stocks for last week.
- As of 9:00 am CST: Brent crude oil down $0.17 to $105.15, US dollar index up $0.673 to 103.627 while the nearby e-mini S&P 500 futures contract is down 15.75 to 4197.00.
- The EIA reported a 1.4 million barrel draw in diesel stocks for last week.
- Diesel exports from Russia are on pace to drop by 31% month-over-month in May to 269,000 bpd.
- The Middle East has increased diesel exports by 212,000 bpd, taking advantage of the elevated crack spreads.
- May ULSD set a new all-time high of $4.7150 today.
- The EIA reported a 1.5 million barrel draw in gasoline stocks for last week.
- The Nymex gasoline crack hit its highest level since 2013 on Wednesday.
- Conway is trading at $1.2550 down 1 cent and Belvieu is trading at $1.2975 down .75 cents.
- The EIA reported a 2.2 million barrel build in propane stocks for last week.
- The US is currently exporting 56.5% of production.
- Total US demand grew by 4.1 Bcf/d yesterday to 96.7 Bcf/d.
- Overnight weather runs were unchanged for the two-week forecast.
- The EIA is expected to report a 42 Bcf injection.
Diesel Exports: With Russian exports falling, the Middle East is looking to pick up the slack. Middle East refiners have the capacity to raise diesel production further as they’re coming out of their traditional winter maintenance period. The increased diesel flows may generate producers around 1.5 billion in revenue this month.