Outlook: Energies appear to be taking a breather to start the morning after what has been an extremely volatile week of trade. Crude is looking to post a modest weekly gain if it can hold above $110.98. Crude and products both tested upper resistance levels to start the week and lower support levels by the end of the week. The trading range established in crude was between $105 and $115.50 where the 50-day moving average is acting as support and March highs are acting as resistance. Conflicting market movers continue to collide on a weekly basis which continues to provide a volatile environment. Tightening global inventories point toward higher prices while covid demand destruction and concerns over macroeconomic health and recession provide large market swings. From a hedging perspective, keeping a tight DPR under these conditions is essential for reducing risk and securing margin.
Crude
- China’s key banks cut an interest rate for long-term loans by a record to bolster a slowing economy.
- Shanghai found the first covid case outside quarantine in six days which could threaten the lockdown being lifted.
- Chinese crude imports are down 5% year-over-year. (BNEF)
- China’s purchases of Russian oil and coal were up 75% in April.
- Energy Secretary Jennifer Granholm advised the Senate that the US will not purchase or accept crude imports from Venezuela.
- US crude exports to Europe are set to slow in the coming weeks according to oil consultancy FGE.
- Equities are looking to rebound today after hawkish fed comments triggered a selloff this week.
- Baker Hughes will release their rig count at 12:00 CST.
- As of 7:55 am CST: Brent crude oil up $0.20 to $112.24, US dollar index up $0.183 to 102.907 while the nearby e-mini S&P 500 futures contract is up 32.25 to 3930.00.
Diesel
- China’s flight cancellations between the 20 biggest airports continue to hover around 70%. (BNEF)
- China’s refinery throughput in April dropped 11% year-over-year. (BNEF)
- China’s diesel exports are down 81% year-over-year. (BNEF)
Gasoline
- China’s gas exports are down 33% year-over-year. (BNEF)
- AAA reports the national average gas price at $4.593.
- Yesterday the US House approved a bill banning “excessive” gasoline prices. This would allow President Biden to create a cap on gasoline prices.
- Gas demand could increase by as much as 1 million bpd with the driving season starting over Memorial Day.
Propane
- Conway is trading at $1.2100 and Belvieu is trading at $1.2300.
- Conway trades at 45% of WTI crude.
- We saw an increase in trade volumes during yesterday’s dip.
- The US is exporting 56.3% of production as of 5/18.
Natural Gas
- Total US demand increased by 1.5 Bcf/d yesterday to 90.7 Bcf/d.
- The EIA reported an injection of 89 Bcf.
- 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.
RBOB-ULSD: The gas-diesel spread he received a lot of attention over the last few weeks and rightfully so. As we near expiration for both nearby contracts there is wide speculation about where this spread will go. Diesel inventories remain extremely tight and at record low levels in parts of the country while gasoline demand is set to climb with the driving season officially here next week. RBOB currently trades at a 7-cent premium to ULSD after being at a 75-cent discount earlier this month.
