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Outlook: Energies are looking for direction to start the morning following the steep losses seen yesterday. A firm bearish trend has developed since early June with crude prices falling nearly $30 in the nearby contract. Crude prices have fallen below $90 for the first time since Russia invaded Ukraine and is on pace for its largest weekly decline since April. Recessionary fears fueled by softening demand have taken control of this market despite the fundamentals remaining tight. Net petroleum inventories have continued to fall during this downtrend, but the market has become hypersensitive to demand destruction domestically and globally. Crude and products are all in oversold territory which could signal the selling may come to a halt short term.
Crude
- WTI is heading for its biggest weekly decline in four months.
- The Bank of England raised interest rates by 50 bps yesterday.
- Over the past 6 weeks, the nearby 3:2:1 crack spread has narrowed by almost $10.
- Brent futures open interest has fallen to a 7-year low.
- BP halted CDU at Gelsenkirchen refinery on Thursday due to a leak. The plant hopes to restart 195,000 bpd of refining over the weekend.
- Nonfarm payrolls rose by 528,000, exceeding the projected 250,000.
- Baker Hughes will report their rig count at 12:00 CST.
- As of 8:51 am CST: Brent crude oil down $0.40 to $93.72, US dollar index up $1.144 to 106.837 while the nearby e-mini S&P 500 futures contract is down 19.25 to 4132.00.
Diesel
- The prompt diesel contract is trading below its 200-day moving average for the first time since December.
- The prompt contract is trading below its lower Bollinger band which signals oversold territory.
- The RSI for the diesel is near 30 which is another indicator of oversold territory.
Gasoline
- The Nymex gasoline crack closed at its lowest level since March yesterday at $28.36.
- AAA shows gasoline prices have fallen for 52 consecutive days.
Propane
- Conway is trading at $1.0650 off 3 cents and Belvieu is trading at $1.070 off 3.5 cents.
- Conway is trading at 51% of crude.
- The US is exporting 62% of production as of 8/3/22.
Natural Gas
- Total US gas demand decreased to 97.8 Bcf/d yesterday.
- US regulators will allow Freeport LNG to resume partial operations in October.
- The EIA reported a 41 Bcf injection into storage for last week.
- Overnight weather runs removed 3 CDDs from the two-week forecast.
Refinery Outages: Global refinery outages reached 871,000 bpd as of Aug 4th. Outages in the US were at 179,000 bpd and at 67,000 bpd in Russia. Refineries have lagged behind projected declines in outages.
