Outlook: Energies are mixed to start the morning for the second day in a row. WTI crude might be finding some resistance slightly above $115, keeping a lid on the market. Three straight days of zero covid cases should be a bullish market mover, but it’s colliding with a stall in the EU oil embargo and reports of production increases in Saudi Arabia. There was positive news in the EIA’s monthly drilling report which projected total output in the major US shale oil basins will rise by 142,000 bpd to 8.761 million bpd in June. This would be the largest increase since March of 2020. Total natural gas output is projected to increase by 0.8 Bcf/d to a record 91.8 Bcf/d. Increases in crude supply are a good sign however refining capacity may continue to be the bottleneck preventing price relief in products. Overall investment in the refining industry needs to increase for production to keep pace with growing demand.
- The US Treasury officials said they will discuss pricing caps and tariffs on Russian oil with G7 countries as an alternative to embargoes.
- Shanghai reported no new covid cases in the broader community for the third consecutive day and optimism continues to grow around ending lockdowns.
- Hungary told the EU it would cost them 810 million to revamp its oil industry to levels that could support the absence of Russian oil.
- Russian seaborne crude exports from its western ports to Asian countries have rebounded to more than 1 million bpd according to Bloomberg.
- Oil output in the Permian Basin is set to rise 88,000 bpd to a record 5.219 million bpd in June according to the EIA.
- WTI crude has rallied around 14% higher over the last four sessions.
- The US SPR is at its lowest level since 1987.
- Reuters estimates crude stocks rose by 1.5 million barrels for last week.
- The API will release its inventory survey at 3:30 CST.
- As of 9:15 am CST: Brent crude oil up $0.82 to $115.06, US dollar index down $0.734 to 103.453 while the nearby e-mini S&P 500 futures contract is up 53.25 to 4058.00.
- Reuters estimates a draw of 800,000 barrels in diesel stocks for last week.
- Platts says its European open origin diesel and gasoil cargo assessments will exclude Russian fuels starting June 1st.
- Reuters is estimating a 1.3 million barrel draw in gasoline stocks for last week.
- AAA reports the national average gas price at $4.523 setting a record high.
- Conway is trading at $1.2250 down a half-cent and Belvieu is trading at $1.2400.
- Conway is at 45% of WTI.
- The US is exporting 50.4% of production as of 5/11.
- Total US demand fell by 2.5 Bcf/d yesterday to 86.7 Bcf/d.
- Reuters is estimating an injection between 80-90 Bcf for last week.
- The EIA released its drilling report and forecasts natural gas production will increase by 750mmcf/d between May and June
- Inventories remain 312 Bcf below the 5-year average.
Deferred Propane: Propane markets have separated from crude with Conway falling to 45% of WTI. Weekly dips are presenting buying opportunities with late planting across the country raising the likeliness for a larger dryer season. You can see the spike in volume for the October contract below during the last dip and this is a trend we expect to see continue.