Outlook: Energies are trading higher today, but crude is still on track for its first weekly loss in three weeks. We saw a large sell-off to start the week driven by global demand fears and concerns over macroeconomic health. The dollar index has surged to 20-year highs which makes it more expensive for traders holding alternative currencies to purchase commodities priced in dollars. The EU is considering delaying the oil and refined products ban due to failed negotiations with Hungary. The nations would move forward with another round of sanctions excluding energy if progress isn’t made. The refined markets are likely to influence crude this morning despite a few bearish headlines. Drawdowns in gas inventories ahead of the driving season have pushed RBOB to record levels and prices at the pump are setting new records daily. The RBOB-ULSD spread traded as high as -2 cents today and bounced off the 200-day moving average. The trend for energy remains bullish while dips continue to bounce off support levels and present buying opportunities.
Crude
- The EU may delay the embargo on Russian supplies due to failed negotiations with Hungary.
- Beijing authorities denied rumors that the city will go into lockdown after new covid cases climbed.
- Shanghai is setting a target of 3 days in a row without Covid to declare itself free of it. Beijing is kicking off a round of mass testing again.
- The EU is continuing talks with Iran to revive the nuclear deal which has been at a standstill.
- The 3-2-1 crack spread is hitting record levels today at $57.00.
- The dollar index is holding at 20-year highs which is helping suppress commodity gains.
- Baker Hughes will report their rig count at 12:00 CST.
- Preliminary May Michigan consumer sentiment fell to 59.1 under the estimate of 64. The sentiment is at its lowest level since 2011.
- December corn futures traded at a contract high $7.585 this morning.
- As of 9:15 am CST: Brent crude oil up $2.40 to $109.85, US dollar index down $0.049 to 104.809 while the nearby e-mini S&P 500 futures contract is up 73.00 to 4000.00.
Diesel
- Global refinery throughput should rise 2.6 million bpd to 80m bpd this year according to JPMorgan.
- Diesel exports from Russia fell by 14% in April compared to February (Pre-Invasion).
- The Colonial Pipeline Co’s latest schedule shows that the first batch of maximum fuel this year will arrive on the east coast in June.
Gasoline
- Nearby RBOB futures have hit their highest level on record at $3.9151 today.
- AAA reports the national average gas price at $4.432 setting a record high.
- The prompt gas spread has grown to 16 cents as supplies tighten ahead of driving season.
Propane
- Conway is trading at $1.2375 up 1 cent and Belvieu is trading at $1.2500 up 1.5 cents.
- With Conway below 50% as a percent to crude, a bearish run may present buying opportunities for fall and winter gallons.
- Late planting of corn leaves the potential for maturity later than usual which could promote stronger propane demand for corn drying this fall.
- The US is exporting 50.4% of production as of 5/11.
Natural Gas
- Total US demand fell by 1.5 Bcf/d yesterday to 87.6 Bcf/d.
- The EIA reported an injection of 76 Bcf
- The 5-year injection average for this week is 82 Bcf.
- Inventories remain 312 Bcf below the 5-year average.
RBOB-HO: The gas to diesel spread has seen significant volatility over the last few months. In the first part of May, gas traded at a 78-cent discount to diesel. Today the spread has narrowed to as much as a 2-cent discount. Crack spreads have favored diesel and refiners have shifted their focus accordingly. This has allowed gas inventories to tighten ahead of peak demand and push gas proportionally higher.
