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August ULSD and RBOB futures expire Friday, July 29. Open positions need to be liquidated/rolled by Thursday, July 28.
Outlook: Energies are mixed this morning with a lack of energy-related headlines. The headline for the day is macro news as US GDP declined for a second consecutive quarter. Equities and commodities have been relatively unaffected since the report was released. The focus in energy this week has been the tightening supply which was reinforced by yesterday’s EIA report. Record exports and falling refinery runs allowed for draws across the board. Crude inventories including the SPR have fallen below 900 million barrels for the first time since 2004. Shell’s CEO expressed concern over demand growth which still has ground to make up compared to 2019 levels and how that could further pressure inventories. Recessionary threats may temporarily halt demand growth but eventually, we should see a return to pre-covid levels.
- Yesterday, a G7 official said they intend to initiate a price cap on Russian crude exports by Dec 5th.
- Shell’s CEO said there remains more upside risk than downside due to demand having not fully recovered and supply continuing to tighten.
- US second quarter GDP fell by 0.9% which was the second consecutive quarter of declines.
- The Fed increased interest rates by 75 bps yesterday.
- Crude exports hit a record level at 4.54 million barrels.
- The EIA reported a 4.5 million barrel draw in crude stocks last week.
- US Crude oil production rebounded 200,000 bpd to 12.1 million bpd last week.
- As of 8:55 am CST: Brent crude oil up $0.73 to $107.35, US dollar index up $0.163 to 106.615 while the nearby e-mini S&P 500 futures contract is down 20.25 to 4002.00.
- The EIA reported a 784,000 barrel draw in diesel stocks for last week.
- Diesel inventories sit 33.4 million barrels below the 5-year average.
- US diesel demand increased by 53,000 bpd last week
- The EIA reported a 3.3 million barrel draw in gasoline stocks for last week.
- Gasoline inventories sit 9.05 million barrels below the 5-year average.
- US gasoline demand increased by 724,000 bpd last week but remains ~200,000 barrels below the 5-year average demand for this time period.
- Conway is trading at $1.12 and Belvieu is trading at $1.1375.
- Conway is trading at 46% of crude.
- The US is exporting 64% of production as of 7/13.
- Total US gas demand declined by 0.2 Bcf/d to 95.1 Bcf/d yesterday.
- The EIA is expected to report a 25 Bcf injection into storage.
- The 5-year average build is 32 Bcf for this time period.
- Overnight weather runs added 1 CDDs to the two-week forecast.
US crude production: US crude production rebounded to its highest level since April 2020 at 12.1 million barrels as planned maintenance in the Gulf of Mexico winds down. The EIA forecasts crude production will average 12.8 million bpd in 2023 which would set a record for most crude production in a year.