Outlook: Energies have traded on both sides today but have continued to edge lower as the morning progresses. The markets made a push higher following reports that China was lifting lockdowns throughout the country. This news developed after Shanghai recently increased mobility restrictions with new cases showing up. The overall demand outlook for China remains bullish as the country slowly returns to normalcy. Markets began pushing lower mid-morning following the CPI numbers which exceeded estimates. Higher than expected CPI numbers are bullish for the dollar index which is bearish for commodities. The DOW and S&P are down over ~2% with the dollar index up ~1% on the day. Gas and diesel are also extending losses this morning while the national average retail gas price edges closer to five dollars. Estimates call for a strong summer driving season despite elevated prices. Volatility remains high across the complex while dips such as today can provide buying opportunities for hedging coverage. We recommend keeping a tight DPR due to a high level of uncertainty in market direction for the long-term outlook.
Crude
- WTI crude is on pace for its seventh consecutive weekly gain.
- Outside of Shanghai, China is lifting most of its lockdowns.
- Saudi Arabia is set to provide less oil to China in July while allocating to other countries like Japan, South Korea, and India.
- Oil consumption in China could jump 12% in Q3 from Q2 according to China National Petroleum
- Libya’s two key eastern oil ports remain shut down by protesters.
- Norway’s oil output could be reduced if workers go on strike on Sunday over wage negotiations.
- Optimism surrounding the Iran nuclear deal continues to plummet with the country removing the majority of the monitoring equipment required under the deal.
- The consumer price index was reported at 1% month over month and 8.6% year over year for May, exceeding estimates of .7% and 8.3% respectively.
- Baker Hughes will report their rig count at 12:00 CST.
- As of 9:55 am CST: Brent crude oil down $1.98 to $121.08, US dollar index up $0.959 to 104.182 while the nearby e-mini S&P 500 futures contract is down 96.00 to 3920.00.
Diesel
- AAA reports the national average retail diesel price at $5.753
- Diesel traded to a high of $4.5135 this morning as it nears levels last seen during the squeeze at the end of April.
Gasoline
- AAA reports the national average retail gas price at $4.986.
- Nymex gasoline futures closed at a record $4.2762
Propane
- Conway is trading at $1.2375 down 1.75 cents 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 0.6 Bcf yesterday to 91.8 Bcf/d.
- The EIA reported an injection of 97 Bcf for last week.
- The 5-year average build for the same time period is 100 Bcf.
- Freeport LNG which suffered an explosion yesterday will shut down for 3 weeks. The facility provides 20% of US LNG processing.
Refinery Outages: Refining outages will be closely tracked in the US with elevated refinery utilization. With refineries running near max capacity, outages can cause a significant impact on the market. Outages in the US currently sit at 307,000 bpd.
