Morning Highlights
Morning Highlights

8-1-22 Markets Sharply Lower to Start the Week and Month


Michael Dix

Aug 1, 2022

Outlook: Energies are lower to start the week on the news of poor factory performance and other economic concerns in China. Both 100-day and 50-day moving averages in nearby crude are trending lower. Putin said that Russia is not going to allow OPEC or any other nation to push oil prices lower. The biggest news in the market still is swirling around global Natural Gas supplies as several countries around the world are not able to secure long-term supplies and face long-term blackouts.

Crude

  • Poor economic data out of China has the market concerned about a reduction in demand and the trade is moving lower.
  • US Shale drillers are set to post record profits that could help offset some losses from the last ten years.
  • Libya’s crude oil production returned to its levels in April after months of shutdowns and protests that prevented that level of output.
  • House Speaker Pelosi is traveling to Southeast Asia and could make an impromptu stop in Taiwan.
  • There is an expectation that talks on a new Iran Nuclear deal will be revived within the next few days. There has been plenty of talks and meetings to date and yet no progress has been made.
  • Last week’s rig counts were up 6.
  • As of 9:14 am CST: Brent crude oil down $3.96 to $100.00, US dollar index down $0.344 to 105.558 while the nearby e-mini S&P 500 futures contract is up 6 at 4139.50.

Diesel

  • Seasonal rains in India cut demand for diesel as well as gasoline.
  • If Russia ramps up its refining capacity diesel could see some support disappear from the market.

Gasoline

  • Implied demand of 9.2 million barrels is fairly bullish and could be the reason that gas could resist the downward pressure from crude oil.
  • Cheaper prices at the pump should lead to an increase in demand.

Propane

  • 1.1000 Conway and Belvieu at 1.1150
  • Larger than expected builds last week has left the market vulnerable to downward pressure.
  • Prices are now back within the five-year range.

Natural Gas

  • According to Bloomberg Germany only has three months to get the nat gas crisis solved otherwise the winter could be an extremely challenging and deadly one.
  • The top LNG exporter in Australia was told to keep more supplies at home.
  • Flows out of Russia are currently below 20% of capacity into Europe.

OPEC Plan VS Reality: Since the spring of 2021 OPEC has fallen behind its production goals and has overcut its production. This spring has seen the gap between reality and goals widen. This has left many in the market unsure if OPEC+ can even return to its potential operating capacity.