Outlook: Energies are mixed this morning with crude seeing gains while products lag behind. Despite the rebound, oil is on pace for a weekly loss as recession concerns caused a steep selloff to start the week. Supply concerns persist with Russia ordering the Caspian pipeline to cease flows this week due to violations in their spillage prevention plan. The pipeline supplies around 1% of global oil however an appeal is set for July 11th and flows remain steady for the time being. The EIA reported inventories yesterday which included a large build in crude with draws in products. Most notably, demand increased for both gas and diesel amid concerns of demand destruction due to elevated prices. It appears recession fears caused the market to overreact and buying has returned during the back half of the week.
Crude
- Europe is expected to receive record exports from the US SPR.
- Of the 5.35 million barrels of oil exported from the US SPR in June, two-thirds are heading to Europe while the remainder heads to India and China.
- South Korea and Japan have ordered around 8 million barrels of US crude for October delivery due to soaring costs for their typical Middle East alternatives.
- US Treasury Secretary Janet Yellen will visit officials in Japan, South Korea, and other G20 economies to increase support for the proposed Russian price cap.
- The EIA reported an 8.2 million barrel build in crude stocks for last week.
- The US SPR fell by 5.8 million barrels.
- Baker Hughes will report their rig count at 12:00 CST.
- Non-farm payrolls rose 372,000, exceeding the estimate of 268,000. High readings can be bullish for the dollar.
- As of 8:50 am CST: Brent crude oil up $1.23 to $105.88, US dollar index down $0.131 to 106.999 while the nearby e-mini S&P 500 futures contract is down 21.25 to 3883.00.
Diesel
- The EIA reported a 1.3 million barrel draw in diesel stocks for last week.
- Diesel demand rose 22.8% last week to 4.3 million bpd.
- Group 3 diesel basis has surged to its highest level since 2014 at 57.5 cents.
- Midwest diesel inventories are 6.3 million barrels below the 5-year average.
Gasoline
- The EIA reported a 2.5 million barrel draw in gasoline stocks for last week.
- Gasoline demand rose 5.5% last week to 9.4 million bpd
Propane
- Conway is trading at $1.1300 and Belvieu is trading at $1.1900.
- The EIA reported a 908,000 barrel build in propane stocks for last week.
- Conway is trading at 46% of crude.
- The US is exporting 72% of production as of 7/6.
Natural Gas
- Total US gas demand decreased by 1.3 Bcf/d to 96.3 Bcf/d yesterday.
- The EIA announced a 60 Bcf injection, less than the 73 Bcf estimate.
- Total US inventories increased to 2,311 Bcf and the deficit to the five-year average decreased to 322 Bcf.
- Overnight weather runs added 3 CDDs through the two-week forecast.
Oil Spreads: The US prompt time spread closely reflects the supply and demand balance of the country’s largest storage hub in Cushing, Oklahoma. The nearby spread pushed to a high of $3.85 this week as stockpiles hover at levels considered to be a minimum requirement to maintain operation. Despite the recent selloffs, the backwardation in the market remains strong signaling tight supplies.
