Outlook: Crude and diesel are seeing losses this morning while gasoline is holding marginal gains. The dollar index is trading at levels last seen in 2002, reflecting macroeconomic concern, and putting downward pressure on commodities. RBOB continues to show strength after seeing a significant drawdown in inventories last week. High diesel crack spreads have pushed refiners to produce more diesel, allowing gas inventories to accelerate lower. The summer driving season may add an additional 1.2 million bpd of demand if prices at the pump don’t push consumers away. With inventories already well below the 5-year average, we can expect retail prices to continue to set new records. Despite the pullback in crude this morning, bullish fundamentals continue to develop. OPEC+ members saw a significant loss in production in April production but were partially offset by a cut in their 2022 demand forecast. The IEA remains optimistic that increases in OPEC+ and US production will turn around and help replace losses seen in Russian supply.
- OPEC+ compliance rate jumped to 221% in April, reducing output by 718,000 bpd.
- OPEC cut its global demand forecast by 210,000 bpd for 2022.
- The IEA said it expects increased production by the US and OPEC+ will help ease the impact of reductions in Russian supply.
- Russia’s oil revenue is up 50% this year according to the IEA.
- The IEA suggests Russian production last month was 1 million bpd.
- The EIA reported a build in crude stocks of 8.4 million barrels for last week.
- The SPR fell by a record 7.9 million barrels last week.
- Crude exports fell by 695,000 bpd last week.
- US oil production fell by 100,000 barrels for 11.8 million barrels last week.
- The US dollar index is trading at multi-decade highs putting downward pressure on commodities.
- As of 8:15 am CST: Brent crude oil down $1.70 to $105.81, US dollar index down $0.559 to 104.401 while the nearby e-mini S&P 500 futures contract is down 29.00 to 3901.00.
- The EIA reported a 914,000 barrel draw in diesel stocks for last week.
- Diesel exports grew by 168,000 barrels last week.
- Diesel stocks are 31.3 million barrels below the 5-year average.
- The EIA reported a 3.6 million barrel draw in gasoline stocks for last week.
- Gas exports grew by 106,000 barrels while imports fell by 430,000 barrels.
- Gas stocks are 12.4 million barrels below the 5-year average.
- Conway is trading at $1.2450. and Belvieu is trading at $1.2550.
- The EIA reported a larger than expected build of 3.4 million barrels yesterday.
- The US is exporting 50.4% of production as of 5/11.
- Total US demand rose by 1.07 Bcf/d yesterday to 86.2 Bcf/d.
- Russia has reduced gas flow to Germany by 3%.
- The EIA is expected to report an injection of 74 Bcf.
- The 5-year injection average for this week is 82 Bcf.
OPEC+ Production: OPEC’s production fell by 718,000 bpd to 37.32 million bpd in April as members continue to struggle to meet targets. Significant losses came from Russia: down 890,000 bpd and Kazakhstan: down 187,000 bpd.