Outlook: Energies are mixed this morning after a big selloff yesterday as news surfaced that China was imposing more lockdowns on its citizens after more positive covid tests. Limited open interest and trade volume combine to create a very volatile market that makes big swings in both directions. The EIA will release its inventory report today at 9:30 am CT. The API is expecting big builds across oil and products. The long-term trend has been decreasing inventories due to demand increases. With these high prices, we may have seen those prices take a toll on demand.
Crude
- Chinese lockdowns have hurt the country’s demand. Refiners ran hard and built up reserves during lockdowns which has led to more supply for the consumer.
- The IEA said that oil prices continue to stand in the way of economic growth and are amplifying global recession fears.
- Libya’s oil production is still limited by political unrest and turmoil in the region and there does not seem to be an end in sight.
- President Biden is still on schedule to travel to the Persian Gulf region in hopes to incent further oil production.
- The API is predicting a 4.76 million barrel build in today’s EIA report. A Reuters survey suggests crude oil stocks may have fallen 154,000 barrels.
- As of 8:55 am CST: Brent crude oil up 30 cents to $99.79, US dollar index up $0.326 to 108.398 while the nearby e-mini S&P 500 futures contract is down 36 to 3789.00.
Diesel
- Demand for diesel remains strong as China demands more Jet Fuel. Inventories are still very tight in the Midwest and the East Coast.
- The API is predicting a 3.26 million barrel build in the EIA report. A Reuters survey suggests diesel inventories may have increased by 1.6 million barrels.
Gasoline
- Refineries are expected to pick up the pace even more and continue to supply as much gasoline into the market as they can.
- The API is predicting a 2.93 million barrel build in the EIA report. A Reuters survey suggests gasoline inventories may have fallen 357,000 barrels.
Propane
- 1.1400 Conway and Belvieu at 1.1575.
- The propane market dropped yesterday as overall pressure from the selloff in energy took hold.
- Inventories are estimated to increase by 1.46 mmb this week.
Natural Gas
- Slightly cooler temps across the US came into the forecast to provide some bearish news along with overall economic concerns.
- The market has pushed higher over the last ten days due to smaller than expected builds along with warmer temps across the country.
- European Gas is still nearly 8 times as expensive as US gas.
Long-Term Oil Demand: While talks of a recession swirl around and consumers look to prepare the IEA says that global demand for oil will continue to increase. The global energy agency is predicting that by 2023 global demand will surpass the highest mark set in 2019 as the world recovers from the pandemic.
