Outlook: Energies started the morning off higher setting new contract highs along the curve for crude oil. Since American traders have arrived at work the market has moved closer to even with crude still positive and products being slightly lower. The EIA will release its inventory report this morning at 9:30 am CST. The market has been testing the $120 mark for most of the last week as global leaders raise their price predictions looking forward. Demand looks to build some steam as Beijing only recorded 2 new cases of Covid and other parts of the country ease up on lockdowns.
Crude
- Stories continue to swirl that China is buying Russian crude oil at a $40 discount to the rest of the world.
- There is increasingly less available ability to produce as the world is attempting to supply the lost barrels from Russia. The UAE supplied 32% of Japan’s oil needs which the island country usually buys from Russia.
- The UAE energy minister said that energy prices are nowhere near the levels they will eventually see.
- Goldman Sachs raised their price estimates from $125 to $140.
- Nearby crude set new contract highs again this morning.
- The API is predicting a 1.85 million barrel build in this week’s EIA report.
- As of 9:20 am CST: Brent crude oil is up $0.57 to $121.10, the US dollar index up $0.001 to 102.325 while the nearby e-mini S&P 500 futures contract is down 14 to 4144.75.
Diesel
- 1000’s of truckers have gone on strike in South Korea. They are seeking higher wages and increased benefits. The disruption has halted activities at multiple ports and key transport areas.
- The renewable diesel market is set to be oversupplied according to a Barclays representative. This is due in part to the transition into electric vehicles as well as a large number of facilities being built across the country that will easily exceed production needs.
- The API is predicting a 3.376 million barrel build in this week’s inventory report.
Gasoline
- There is some bearish news as crack spreads have prompted European refineries to buy large amounts of oil to produce more gasoline. At these levels Refinery plants across the globe should be running at maximum capacity.
- The API is predicting a 1.82 million barrel build in this week’s inventory report
Propane
- Inventories are expected to rise 2.5 MMB according to OPIS
- The US is currently exporting 57% of its production.
- Conway is at $1.2325 Belvieu is at $1.2525
Natural Gas
- Walmart is buying natural gas, hydrogen, and electricity as they look to honor their commitment to switch all of their trucks away from fossil fuels.
- A heat wave across the US is expected to increase demand, especially in the Midwest and South.
- Reuters is expecting a build anywhere from 80 BCF to 97 BCF
US Dollar Strength: Typically, a strong US dollar means weaker commodities. This year the two have climbed in unison. This means that the American consumer is seeing high prices but the global consumer is seeing prices soar past records set in 2008. India for example is paying 45% more than it did when Brent crude was $147.50.
