Outlook: Energies are giving back the gains they made yesterday as President Biden is set to announce an executive order to fund green energy due to the energy crisis. The EIA will release its inventory report this morning at 9:30 am CT. China continues to buy oil from Saudi Arabia and Russia. Europe is working on potential solutions to the energy crisis across the Atlantic while Gazprom turns the Nordstream Pipeline back on at reduced and conditional levels.
Crude
- Chinese spending on Russian energy products is up year over year, but down month over month.
- Russian oil being sold to China is priced at a 12-dollar discount to competing Brazilian barrels.
- While the energy complex continues to trade at elevated levels China approves more and more coal power plants.
- Saudi Arabia expects its crude exports to increase this month as flows to China grow. 7.7 million barrels per day are expected to be exported compared to 6.6 million bpd in June.
- President Biden is expected to announce a Climate Crisis emergency today.
- The EIA will release its inventory report for last week at 9:30 am CT. The API is predicting a 1.86 million barrel build while the Reuters poll is showing a 1.4 million barrel build.
- August Futures expire today.
- As of 9:04 am CST: Brent crude oil down $1.53 to $105.72, US dollar index down $0.088 to 106.770 while the nearby e-mini S&P 500 futures contract is down 7.5 points to 3930.5.
Diesel
- Diesel demand is currently at a 13-month low and futures are being stressed by macroeconomic factors.
- The API is predicting a 2.15 million barrel draw in inventories while Reuters is projecting a 1.2 million barrel build.
- Diesel still has the shortest supply and therefore could have the least downside risk of the oil and products.
Gasoline
- India eliminated a levy on gasoline exports three weeks after they were put in place.
- The API is predicting a 1.29 million barrel build. Reuters poll is showing a 100,000 barrel build.
Propane
- 1.1200 Conway and Belvieu at 1.1250
- Builds are expected to be 2.2 mbbls any report that shows less than 1.2 mbbls of builds could be seen as bullish.
Natural Gas
- Nordstream 1 is expected to start back up once a turbine from Canada is reinstalled.
- The flow will likely not be 100% and there are conditions that have to be met in order for flows to resume.
- The EU has proposed a 15% usage cut in order to alleviate the effect of Russian export concerns.
Saudi Arabia Oil Production: Saudi Arabia has been expressing to the world that its production capacity is maxed out despite leaders like President Biden repeatedly asking for more production. Historically it is worth noting that the country is at all-time high levels of output. This has led many in the industry to assume that this is the max capacity and that Saudi Arabia has extremely limited spare capacity.
