Outlook: Energies are falling this morning with WTI pushing below $100. Renewed lockdowns in China have set the markets sharply lower as mobility restrictions once again threaten demand. Adding to the downside move includes a strengthening US dollar and a reduced demand outlook from OPEC. OPEC expects demand to grow by 2.7 million barrels next year which is around 600,000 barrels less than in 2022. President Biden is in Saudi Arabia this week where he’s expected to push for greater oil production from OPEC. OPEC spare capacity has been in question after comments from the UAE said they were near max production which goes against conflicting data suggesting they have ~1.2 million barrels of spare capacity. The EIA will report inventories tomorrow morning while the API survey will be released this afternoon at 3:30 CST. Reuters is calling for draws in crude and gas and a build in diesel.
Crude
- Shanghai has renewed its covid lockdowns with case numbers on the rise.
- Bloomberg suggests nearly 30 million people are under some form of movement restriction following the renewed lockdowns.
- President Biden will make a case for greater oil production from OPEC when he meets with Gulf leaders in Saudi Arabia this week according to national security advisor Jake Sullivan.
- US treasury Secretary Janet Yellen is in Asia discussing further strengthening of sanctions against Russia, including the previously mentioned price caps.
- The IEA said that a cap on Russian oil should include refined products.
- OPEC forecasts that world oil demand will rise, but at a slower rate than in 2022. They’re forecasting a rise by 2.7 million barrels in 2023 against 3.36 in 2022.
- OPEC says its oil output rose by 234,000 barrels in June.
- The API will report its inventory survey at 3:30 CST.
- Reuters is estimating a 1.9 million barrel draw in crude stocks for last week.
- As of 7:08 am CST: Brent crude oil down $4.50 to $102.60, US dollar index up $0.198 to 108.219 while the nearby e-mini S&P 500 futures contract is down 18.25 to 3838.00.
Diesel
- Reuters is estimating a 2.4 million barrel build in diesel stocks last week.
- Heating oil cracks have rebounded 6 dollars this week to ~$54.85
Gasoline
- Reuters is estimating a 300,000 barrel build in gas stocks last week.
- OPIS data suggests consumption is running 6-8% below year-ago levels over the past month.
- Gasoline cracks have remained subdued holding below $40.
Propane
- Conway is trading at $1.1700 and Belvieu is trading at $1.2025.
- A fire at the ONEOK Medford terminal on Saturday has knocked out some flows of NGLs into the Conway market.
- Conway is trading at 47% of crude.
- The US is exporting 72% of production as of 7/6.
Natural Gas
- Total US gas demand decreased by 1.8 Bcf/d to 93.6 Bcf/d yesterday.
- US power burn demand continues to trend near-record levels this summer, with MTD power burn averaging 43 Bcf/d in July.
- Overnight weather runs added 1 CDD through the two-week forecast.
US Dollar Index: The US dollar continues to climb to multi-decade highs as inflation levels climb. A higher US dollar is bearish for commodities as it makes it more expensive to buy dollar-priced commodities for holders of other currencies. $109.670 is the next resistance level before we set our sights on $120 which we last saw in 2001 and early 2002.
