Outlook: Energies are seeing mixed trade today as they digest the large inflow of headlines this week. The two major market movers continue to revolve around the EU’s oil embargo and China’s covid lockdowns. With the EU introducing its proposal to end imports of crude and refined products by the end of the year, and a lack of new headlines regarding China’s lockdowns, energies have pushed higher for the second week in a row. The dynamic between diesel and gasoline is showing the first signs of a shift today with diesel trading down over 2 cents and gas trading up 7 cents. Crack spreads have favored diesel production for an extended period of time, and we may be seeing a signal that a shift in supply is taking place. Inventories for both products continue to fall pressured by increasing demand and exports remaining elevated. Volatility remains high with potential breakouts only a headline away. From a hedging perspective, reducing exposure by keeping a tight DPR is the safest way to secure profit during these unpredictable market conditions.
- The EU is tweaking its sanction plan allowing until 2024 for Hungary, Slovakia, and the Czech Republic to enforce the embargo.
- The US announced a proposal to buy back 60 million barrels to replenish the SPR by the end of the year.
- The US Senate committee passed the antitrust bill that would allow lawsuits for collusion against OPEC+.
- Oil is set for its first back-to-back increase in two months.
- Baker Hughes will report their rig count at 12:00 CST.
- The Dow and the S&P closed lower by 3.12% and 3.56% respectively, marking the worst day for the DJIA since 2020 and the second-worst day for the S&P this year.
- As of 10:23 am CST: Brent crude oil up $2.49 to $113.39, US dollar index down $0.381 to 103.371 while the nearby e-mini S&P 500 futures contract is down 2.00 to 4141.00.
- The front-month diesel spread has fallen below 20 cents after reaching $1.74 last month.
- Diesel has resisted upward moves with crude this week and may present buying opportunities with the market still trending higher.
- Gas has gained strength against diesel this week with the RBOB-HO spread at -$0.28.
- Crack spreads currently favor higher production of diesel fuel which may tighten gas inventories as we move into the summer driving season.
- Today’s national average gas price is $4.279 and pushing towards the recent all-time high of $4.331 set on March 11th.
- Conway is trading at $1.2700 down 1 cent and Belvieu is trading at $1.2900 down 1 cent.
- The EIA reported a build of 1.6 million barrels in propane stocks for last week.
- The US is exporting 52% of production as of 4/29.
- Total US demand fell by 0.8 Bcf/d yesterday to 92.2 Bcf/d.
- The 5-year average build for this time of year is 78 Bcf.
- The EIA reported a larger than expected injection of 77 Bcf.
Overseas Diesel: Singapore inventories represent a key demand indicator for Asia. After falling by nearly a third in two weeks, inventories sit at their lowest levels since 2013. Outside of China, demand in Asia remains strong.