Morning Highlights
Morning Highlights

5-4-22 Markets Higher Before EIA and FED Announcements


Michael Dix

May 4, 2022

 

 

Outlook: Energies have bounced higher this morning ahead of this week’s EIA report and the conclusion of the FED meeting. The fed is expected to announce a one-half percent rate hike in an effort to limit inflation and stabilize the economy, which saw a decline in the first quarter. The second consecutive quarter of decline and the economy is officially in a rescission. Several of Russia’s export markets that are still open would like to see a further discount as taking the product is still very unpopular in western countries. Chinese demand appears to be turning the corner as their Covid lockdowns near their end and the severity is eased.

Crude

  • The EU continues to plan an embargo on Russian oil. The Union is also squeezing harder on Russian banking making payments even harder.
  • The Czech government which has been an opponent of an embargo said that it will support it if they are allowed an exemption for more time to prepare.
  • Putin said that Russia is willing to destroy all existing trade agreements in order to win the conflict in Ukraine.
  • India, which has been taking Russian oil wants the discount to reach below $70 per barrel.
  • OPEC did not increase production in April as they had planned. Instead, their compliance rate increased, and world supply remains very tight.
  • US crude exports rose to 3.32 million barrels per day.
  • The API is predicting a 3.5 million barrel draw in the EIA report.

Diesel

  • The API is predicting a 4.6 million barrel draw in the EIA report.
  • Diesel stocks are now at a 30 million barrel annual deficit.
  • Trade experts remain very concerned that increases in production are unlikely even though elevated prices have refiners attempting to switch processes to generate more diesel.  

Gasoline

  • The API is predicting a 4.5 million barrel draw in the EIA report.
  • Last week saw 1.8% increase in retail prices. Increases in prices as we move into the higher demand season of summer could temper some fringe demand.

Propane

  • Conway is up .5 cents to $1.2550 and Belvieu is up one cent at $1.2850
  • With the diversion from the crude trend this could signal a large build in inventories or lower exports.

Natural Gas

  • European Natural gas is higher as fears of an embargo along with potential pipeline shut-offs on Russia’s end.
  • There is some increased demand in the US as there are parts of the country that will see colder than average temps this coming week.
  • The API predicts a 56 bcf to 69 bcf build in inventories.

Crude Inventories: Despite large releases from the SPR the US continues to reduce its available inventory. The trend is still lower and lower inventories. There are very few new drilling projects getting started. The drilled but uncompleted wells continue to drop as they expire. Production has not returned to the oil market and it does not appear that there is an immediate plan to start the process.