Outlook: Energy markets are continuing to show signs of light trade ahead of the holiday. Crude is starting the morning with modest gains while products remain mixed. There has been a lack of headlines this week to give the market direction and we’ve seen crude trade within its tightest range in months. The market fundamentals continue to tighten with the EIA reporting another net draw in total petroleum products. Demand is showing some sign of slowing over the past four weeks but remains in a growth pattern. Summer driving season is here with above-average travel estimated for Memorial Day. Refiners have ramped up run rates to their highest levels since 2019 but elevated diesel crack spreads have shifted the supply focus away from gasoline in recent weeks. This dynamic may continue to pressure gasoline prices consumers are paying at the pump throughout the summer. JPMorgan estimates gas prices will reach $6.20 by the end of August this year.
Crude
- Yesterday the US’s top envoy to Iran nuclear talks said that efforts to revive the 2015 nuclear deal are unlikely and prospects for reaching a deal are “tenuous at best.”
- Iran’s foreign minister said US President Joe Biden has to end his predecessor’s maximum pressure strategy against Tehran in order to restore the 2015 Nuclear deal.
- Sources told Reuters the US confiscated an Iranian oil cargo held on a Russian-operated ship near Greece and the cargo will be sent to the US aboard another vessel.
- OPEC+ is expected to maintain its current policy when it meets on June 2nd by adding an additional 432,000 bpd of oil production.
- Russia’s top oil producers are estimated to have made their highest quarterly profit in almost a decade due to elevated prices.
- Saudi Arabia’s oil exports reached $30 billion in March and their highest level in 6 years.
- The UK government will impose a “Windfall Tax” on the profits of oil and gas companies to help ease the country’s cost-of-living crisis.
- The US Strategic Petroleum reserve fell by 6 million barrels last week and to a 35-year low.
- Crude stockpiles at Cushing have fallen to 25 million barrels for the first time since March.
- The EIA reported a 1 million barrel draw in crude stocks for last week.
- As of 8:45 am CST: Brent crude oil up $1.35 to $115.38, US dollar index down $0.041 to 101.015 while the nearby e-mini S&P 500 futures contract is up 38.25 to 4015.00.
Diesel
- The EIA reported a 1.6 million barrel build in diesel stocks for last week.
- Diesel inventories sit at 28.993 million barrels below the 5-year average.
- The average total distillate demand over the past four weeks is down 7.2% compared to last year.
Gasoline
- The EIA reported a 482,000 barrel draw in gasoline stocks for last week.
- Gasoline inventories sit at 18.269 million barrels below the 5-year average.
- The average total gasoline demand over the past four weeks is down 2.71% compared to last year.
Propane
- Conway is trading at $1.1900 and Belvieu is trading at $1.2000.
- The EIA reported a build of 1.8 million barrels in propane stocks for last week.
- Midwest stocks saw a build of 1.1 million barrels.
- Exports exceeded expectations at 1.64 million barrels and the 2nd largest weekly reading all time.
Natural Gas
- Total US demand declined by 0.3 Bcf/d yesterday to 87.3 Bcf/d.
- The EIA is expected to report an injection of 87 Bcf.
- The 5-year average injection for this time period is 97 Bcf.
- The inventory deficit could climb to 320 Bcf over the 5-year average assuming the injection today, which would be the widest level this year.
Crude Stocks: Cushing Oklahoma represents the largest storage hub in the country for crude oil. Inventories at Cushing fell for the third straight week to 25 million barrels. 22 million barrels is considered the operational minimum that could trigger dislocations in prices between immediate supply versus those for delivery in the future.
