Outlook: Energies are continuing their slide this morning after the Federal Reserve announced a 75 basis point increase in interest rates yesterday. This marked the largest rate increase since 1994 and raises overall concern about the health of the economy. The EIA reported a surprise build in crude inventories last week however it was accompanied by a 7.7 million barrel draw out of the SPR. US Production also rose back to 12 million bpd for the first time in two years which may have helped fuel the selloff. Propane saw a 1.5 million barrels build with Midwest inventories increasing by 1.1 million barrels. Markets were off slightly following the report and may present an opportunity for layering in hedges for fall and winter gallons. Overall, the energy complex saw a net draw of 2.7 million barrels, and the fundamentals of the market continue to tighten.
Crude
- The Fed raised interest rates yesterday by 75 basis points, the largest increase since 1994.
- The IEA, EIA, and OPEC all see global oil demand growth falling back in Q1 2023.
- Powell said a 50 or 75 bp hike is likely for July and not 100.
- Saudi Energy Minister said its ties remain strong with Russia.
- OPEC Secretary-General Mohammad Barkindo said Russia is continuing to fulfill its production obligations.
- Libya continues to see supply disruption of over 1 million bpd due to political protests.
- Open interest in WTI futures fell to the lowest level in almost six years.
- The EIA reported crude stocks rose by 1.9 million barrels last week.
- US crude production rose to 12 million bpd last week for the first time since early 2020.
- As of 8:45 am CST: Brent crude oil down $0.95 to $117.56, US dollar index down $0.716 to 104.442 while the nearby e-mini S&P 500 futures contract is down 109.25 to 3679.00.
Diesel
- The EIA reported diesel stocks rose by 725,000 barrels last week.
- Diesel cracks hit record levels yesterday at $75.76
Gasoline
- The EIA reported gasoline stocks fell by 710,000 barrels last week.
- The White House has said they are willing to use the same emergency wartime law they used to increase the production of baby formula to boost the nation’s supply of gasoline.
- Energy Secretary Jennifer Granholm and refining executives are expected to meet on June 23.
- US retail gasoline prices had their first back-to-back drop since April.
Propane
- Conway is trading at $1.1900 and Belvieu is trading at $1.1950.
- The EIA reported propane stocks rose by 1.5 million barrels last week.
- Conway inventories rose by 1.1 million barrels.
- Conway is trading at 42% of crude, down from 63% in March.
- The US is exporting 59% of production as of 6/15.
Natural Gas
- Total US demand increased by 0.2 Bcf yesterday to 95.9 Bcf/d.
- Overnight weather runs added 4 CDDs for the two-week forecast.
- The EIA is expected to report an 89 Bcf injection in today’s report.
Retail Gas Prices: Top oil refiners are on course to hit $10 billion in profits this quarter. JPMorgan said with little prospect for any near-term boost in output, this flurry of pricing could go on for years, barring an economic crash. With hurricane season looming, any further supply disruption could bolster prices even higher.
