Outlook: Energies are going back and forth a bit this morning and at the moment are slightly higher. Diesel once again is pulling back in favor of gas as the spread gets wider. Natural gas is up big to start the week as all remaining contract months for 2022 are trading above $8. Global production and supply continue to be a big concern amid continued fighting in Russia and Ukraine. In contrast, propane has remained at lower levels and is suggesting that now may be a good time to buy for this coming year. The complex will likely look to the news for direction today and in the meantime could be a back and forth type of market.
Crude
- Chinese economic numbers were poor reflecting the Covid impact on consumer demand.
- Germany says it will ban Russian crude imports before the end of the year whether the EU does or does not.
- Russian oil exports via sea trade fell another 2% this past week.
- The UAE selected their new leader commonly referred to as MBZ. He is credited with the revitalization of the country’s oil production.
- The Prime Minister of Sri Lanka says that his country is out of petrol.
- Traders have increased volume in the options market to hedge their risk of late according to the CME and ICE.
- As of 9:18 am CST: Brent crude oil is up $0.15 to $111.70, the US dollar index down $0.067 to 104.550 while the nearby e-mini S&P 500 futures contract is down 11.25 to 4007.75.
Diesel
- Chinese diesel consumption dipped to a 2 year low in April, but refinery rates suggest a return of demand in May.
- ULSD futures now trail RBOB and crude despite still having very tight inventories. US stocks are 31 million barrels lower than the five-year average.
Gasoline
- RBOB futures traded above $4 for the first time.
- Indian gasoline consumption in India spiked higher as people used the air conditioning to escape the heatwave.
- The US average price at the pump also set a new record.
Propane
- Percentage to crude is below 50% whereas before the build season that number was above 57%
- Conway looks to see a floor near $1.2000-$1.2100 mark. If that resistance is broke look to the $1.1500-$1.1900 range.
- Conway is currently $1.2300 and MB is at $1.2400
Natural Gas
- Natural gas shortages look to continue into the future as Russia and reportedly Ukraine intermittently shut off gas flows to the rest of Europe.
- EIA inventories are still 16.5% below the five-year average.
- The US is still exporting the maximum total product that it can with its current facilities.
Gas-Diesel Spread: As gas prices soar, diesel prices lag behind and RBOB is now trading at a premium to diesel. Since the beginning of May, there has been a near 90-cent swing in favor of RBOB. This is remarkable because refiners have not drastically switched to a diesel-focused product and diesel inventories are still massively lower than its five-year average.
