Outlook: Energies are seeing another significant selloff today, continuing from the losses seen yesterday. Diesel and gas are off 30 and 40 cents with crude off $9 over the last two sessions. Macro markets have seen large losses with the fed saying interest rates will increase until inflation shows signs of slowing. Concerns over a recession are also becoming a larger discussion every week. Bearish headlines are adding fuel to the fire this morning with reports of China buying Russian oil, increased Russian crude production, and Venezuela exporting crude to Europe. The fundamentals of the market however have not changed. Inventories all over the world continue to fall and demand continues to show signs of growth despite elevated prices. JPMorgan is predicting over $6 gas by the end of summer which could stress test demand destruction levels here in the US. The market has some room to fall this week before testing support levels, but the long-term outlook remains bullish.
Crude
- China is in talks with Russia to buy oil for their strategic crude stockpiles.
- Russia’s oil production has increased by 200-300k bpd in May so far according to their prime minister Alexander Novak.
- Nigeria plans to increase crude exports to 126k bpd in July from 98k bpd in June according to Bloomberg loading schedules.
- WTI’s discount to Brent reached the narrowest level since October at -$1.62 yesterday.
- The EIA reported a draw of 3.4 million barrels for last week.
- Macroeconomic fears and interest rate hikes continue to pressure commodities.
- The S&P fell 4% and the DJIA fell 3.57% yesterday.
- As of 8:00 am CST: Brent crude oil down $2.00 to $107.11, US dollar index down $0.662 to 103.148 while the nearby e-mini S&P 500 futures contract is down 40.25 to 3882.00.
Diesel
- The EIA reported a 1.2 million barrel build in diesel stocks for last week.
- ULSD has fallen ~75 cents off its highs from the start of May.
Gasoline
- The EIA reported a 4.7 million barrel gasoline draw for last week.
- UK gas prices hit a new record yesterday at $2.08 a liter.
- Gasoline margins in Asia jumped $35 a barrel this week with global demand pushing product prices higher.
Propane
- Conway is trading at $1.2175 and Belvieu is trading at $1.2350.
- The EIA reported a 293,000 barrel build for last week
- The US is exporting 56.3% of production as of 5/18.
Natural Gas
- Total US demand increased by 3.8 Bcf/d yesterday to 89.7 Bcf/d.
- The EIA is expected to report an 87 Bcf injection for last week.
- The 5-year average injection for this time period is 87 Bcf.
- A heatwave moving through the south is putting abnormal pressure on the Texas power grid.
OPEC Spare Capacity: OPEC’s spare capacity was about 4.7 million bpd as of April, but Bloomberg Intelligence believes the actual number may be far below that. Unsuccessful production increases have hinted that these spare levels may not be attainable. The current production agreement terms do not allow nations to compensate for others’ lack of production.
