Outlook: Crude and products are mixed to start the day amidst clashing headlines. Multiple reports surrounding OPEC+ have helped push markets in both directions over the last two days. Yesterday multiple sources said OPEC+ was considering removing Russia’s output from their production quotas. This spurred comments from Saudi Arabia stating they would be willing to increase production if Russian output dropped substantially due to sanctions. OPEC did not discuss the mentioned proposal during their technical meeting. OPEC+ did decide to increase their production target for July to 648,000 barrels in today’s meeting. OPEC+ may be acknowledging global oil shortfalls due to Russian sanctions, which is something they’ve shied away from previously. China is slowly unwinding its covid lockdowns which are receiving relatively low attention with the flood of market-moving headlines this week. An increase in demand figures in China will offer another opportunity for the market to grab on as business and travel progress towards normal. The EIA will release its inventory report today at 9:30 CST. The API and Reuters estimates expect over a 1 million barrel draw in crude stocks for last week. Diesel is expected to build, while gasoline estimates are mixed.
Crude
- President Biden is expected to visit Saudi Arabia this month to discuss oil production.
- Saudi Arabia has said it’s ready to pump more crude should Russian output decline substantially amid sanctions.
- OPEC+ bumped their production target for July to 648,000 bpd, above the estimated 432,000 bpd target.
- OPEC+ is expected to increase production in August by 600,000 bpd.
- OPEC+ is considering removing Russian output from its production quotas.
- Shanghai remains in the process of unwinding covid lockdowns.
- China’s biggest oil and gas producer wants to shift half of its output to hydrogen, geothermal energy, and clean power by 2050.
- India’s oil imports from Russia increased to an all-time high of 840,000 bpd in May.
- The nearby 3-2-1 crack spread is trading near new highs above $57.
- Reuters is estimating a 1.4 million barrel draw in crude stocks last week.
- The API survey reported a 1.18 million barrel draw in crude stocks last week.
- As of 8:35 am CST: Brent crude oil up $0.01 to $116.30, US dollar index down $0.427 to 102.071 while the nearby e-mini S&P 500 futures contract is down 11.25 to 4087.00.
Diesel
- Reuters is estimating a 1 million barrel build in diesel stocks last week.
- The API survey reported an 858,000 barrel build in diesel stocks last week.
- Europe imported 13 million barrels of jet fuel in May, the highest monthly import level since October 2020 according to Vortexa.
Gasoline
- Reuters is estimating a 500,000 barrel build in gasoline stocks last week.
- The API survey reported a 256,000 barrel draw in gasoline stocks last week.
Propane
- Conway is trading at $1.2250 and Belvieu is trading at $1.2425.
- Propane inventories are expected to rise by 2.1 million barrels today in the EIA report.
- Propane continues to separate from crude with Conway trading at 44% of WTI.
Natural Gas
- Total US demand was flat yesterday at 88.6 Bcf/d.
- The EIA is expected to report an injection of 78 Bcf.
- The 5-year average build for this week is 100 Bcf.
- Total inventories sit at 1,812 Bcf and the deficit to the 5-year average expanded to 327 Bcf.
OPEC Spare Capacity: OPEC continues to see pressure from outside nations including the US to increase production. OPEC does have the capacity to increase production but as they do, the gap between production and spare capacity tightens. There is growing concern that spare capacity levels are overestimated due to a lack of investment in infrastructure.
