Outlook: Energies are mixed this morning with crude trading lower and products extending gains. Renewed concern over Chinese demand recovery erased crude gains early this morning as Shanghai announced a new round of mobility restrictions. This comes after lifting lockdowns earlier this month. Despite the lockdowns through May, Chinese crude imports rose to their highest levels in two years as they continue to buy discounted Russian crude. Gas and diesel are climbing today with diesel leading the complex despite its larger than expected build in inventories last week. East Coast inventories have rebounded off their lows but remain at record low levels with refining capacity near maxed out at 99%. Gas demand has remained strong through elevated prices with the national average retail price sitting at $4.97. Natural gas is down over 7% this morning after Freeport LNG said they will be shut down for 3 weeks following yesterday’s explosion. The facility accounts for 16% of US export capacity and had been exporting 2.1 Bcf/d. European natural gas is seeing an inverse reaction with TTF prices up over 7%. Europe has become more dependent on US natural gas as they move away from Russian energy.
Crude
- Shanghai will reinstate movement restrictions after lifting lockdowns earlier this month.
- China’s crude imports rose in May to their highest level in nearly two years.
- Yesterday Iran said they would switch off two of the UN’s nuclear watchdog cameras after the UN’s board passed a resolution criticizing Tehran for not explaining uranium traces on site.
- The Brent and WTI Dec-Dec spreads both climbed to their highest levels since 1997 and 1984 respectively.
- The CME Group cut WTI margins by 4.6% this month
- The EIA reported a 2 million barrel build in crude stocks for last week.
- The US SPR fell by 7.3 million bpd last week.
- As of 8:55 am CST: Brent crude oil down $0.58 to $123.00, US dollar index up $0.110 to 102.652 while the nearby e-mini S&P 500 futures contract is up 2.25 to 4016.00.
Diesel
- The EIA reported a 2.6 million barrel build in diesel stocks for last week.
- East coast refinery utilization climbed to 99.2%.
- East coast diesel inventories have bounced off their lowest but remain at their lowest levels since 1993 at 25.5 million barrels.
Gasoline
- The EIA reported an 800,000 barrel draw in gasoline stocks for last week.
- The US expects to import 393,000 tons or ~400,000 bpd of gasoline this week, and ~800,000 bpd of gasoline next week coming from Europe.
Propane
- Conway is trading at $1.2550 and Belvieu is trading at $1.2725.
- The EIA reported a smaller than expected build of 660,000 barrels for last week.
- Conway is trading at 43% of crude, down from 63% in March.
- The US is exporting 57% of production as of 6/2.
Natural Gas
- Total US demand increased by 1.0 Bcf yesterday to 92.0 Bcf/d.
- The EIA is expected to report an injection of 96 Bcf.
- Freeport LNG which suffered an explosion yesterday will shut down for 3 weeks. The facility provides 20% of US LNG processing.
Oil Margins: For the first time since Russia’s invasion of Ukraine, margins have begun to decline. Clearing houses had previously been boosting margins due to high volatility which decreased liquidity as traders abandoned the market. CME Group cut its effective cost of trading WTI by 4.6% this month.
