Outlook: Energies are looking to edge higher today to cap off another volatile week. The market saw a plethora of bullish headlines this week which had crude testing $120. It has since backed off its highs and settled in around $117. Markets were propelled by the EU oil embargo and news of Shanghai lifting lockdowns to start the week. OPEC+ announced they would increase their production target for July, but overall, the increase was underwhelming pushing markets higher. US inventories saw another week of declines in this week’s inventory report recording a net draw of 4.8 million barrels of petroleum products. Demand also saw growth in both diesel and gasoline despite surging prices. Despite a week of bullish headlines and fundamentals, the health of the economy and the threat of recession is still acting to keep a lid on breakouts.
Crude
- OPEC+ increased its production target for July to 648,000 bpd.
- It’s estimated OPEC will increase production in August by ~600,000 bpd.
- Chief oil analyst at Pareto Securities Nadio Martin Wiggen, estimates OPEC+ will deliver around 250,000 bpd of their target for July and August.
- Yesterday the EU officially approved the partial Russian energy embargo focused on seaborne transported supplies.
- The US SPR fell by 5.4 million barrels last week.
- The EIA reported a 5 million barrel draw in crude stocks for last week.
- Baker Hughes will report their rig count at 12:00 CST.
- Nonfarm Payrolls were reported at 390,000 for May, exceeding the consensus of 325,000. A higher-than-expected figure can be seen as bullish for the dollar.
- As of 8:40 am CST: Brent crude oil up $0.22 to $117.82, US dollar index up $0.165 to 101.989 while the nearby e-mini S&P 500 futures contract is down 45.25 to 4130.00.
Diesel
- The EIA reported a 529,000 barrel draw in diesel stocks for last week
- US diesel demand rose 102,000 bpd to 3.969 million bpd.
- The Biden Administration is expected to announce $700 million in aid payments for biofuel producers to make up for losses due to covid.
Gasoline
- The EIA reported a 711,000 barrel draw in gasoline stocks for last week.
- US gasoline demand rose 179,000 bpd to 8.977 million bpd.
- AAA reports the national average retail gas price at $4.761.
Propane
- Conway is trading at $1.2250 and Belvieu is trading at $1.2400.
- The EIA reported a larger than expected build in propane inventories of 3.2 million barrels.
- Midwest propane inventories remain 14.4% below the 5-year average.
Natural Gas
- Total US demand was flat yesterday at 89.9 Bcf/d.
- The EIA reported a larger than expected injection of 90 Bcf.
- The 5-year average build for this week is 100 Bcf.
- Total inventories sit at 1,902 Bcf and the deficit to the 5-year average expanded to 337 Bcf.
Continuous RBOB: Nearby RBOB continues to set new contract highs as demand climbs and supply dwindles. Along with moves in the futures market, basis levels are also climbing with 12 and 13 cent weekly gains in group 3 and Chicago respectively. Prices at the pump could test $5 next week with the national average currently at $4.761.
