Morning Highlights
Morning Highlights

5-2-22 Energies Start the Week Lower


Michael Dix

May 2, 2022

 

 

Outlook: Energies are trading lower this morning on news of continued Chinese lockdowns and demand destruction. The fighting in Ukraine has gone on despite rumors that an embargo on Russian oil by the EU could come by the end of the year. European countries are still trying to find ways to fill the void left by reduced oil imports from Russia. More Countries in the region are moving closer to independence from the Russian energy market. OPEC compliance is now above 160% due to several countries falling further behind in their production quota. OPEC+ is expected to maintain their production cuts in an effort to stabilize the marketplace from their perspective.

Crude

  • China increases the number of citizens on lockdown amid the Covid outbreak.
  • Confirmed cases in key cities in China have gone from several thousand to now only a few hundred per day.
  • Russia continues to struggle to find export locations.
  • The soonest experts expect an EU embargo of Russian oil at the end of the year.
  • Poland says that it is ready to be free from Russian oil and products.
  • The US is exporting a large percentage of its production as well as its SPR releases in an effort to fill the void left by reduced Russian Production.
  • Iraq refinery was hit by a rocket overnight igniting one of the largest storage units. The fire has been brought under control.
  • Nancy Pelosi flew to Ukraine to meet with President Zelensky.
  • As of 9:27 am CST: Brent crude oil is down $2.50 to $104.54, the US dollar index is up $.508 to 103.468 while the nearby e-mini S&P 500 futures contract is up 21.5  to 4149.5

Diesel

  • Workers refused to unload a Russian diesel tanker at a Dutch port.
  • Diesel remains the tightest of the energy markets as refiners attempt to move to a more diesel-heavy crack plan.
  • June Diesel is trading nearly 80 cents lower than the price that May went off at.

Gasoline

  • US inventories are 4.2 million barrels below the five-year average.
  • Ethanol use should offset some of the tightness as E-15 was approved year-round in the US. This will be limited due to the lack of retailers able to sell E-15.

Propane

  • Despite the winter storm in the Dakotas, propane production was recorded at record levels.
  • Conway is at $1.2200 Belvieu is at $1.2350.
  • 56.5% of production was exported as of 4/27/22.

Natural Gas

  • European Natural Gas has dipped down to near $21, which is the lowest price since last fall. This is due in part to a warmer forecast and LNG vessels arriving and unloading at ports.
  • Total demand fell 3.5bcf/day last week. Production increased 0.7bcf/day last week.
  • Demand is expected to shrink by .9bcf/day over the next seven days.

Prompt Diesel Spread: As the May contract expired, the squeeze pushed the spread to nearly $1.80. Today that spread is back near 30 cents. With volatile markets, this spread is something to keep an eye on.