Outlook: The market is trading on both sides this morning and looking for direction. Better demand numbers in last week’s EIA report as well as the headline that OPEC will cut production by 2 million barrels per day have spring boarded the market higher. Tight inventories are also partly to blame as global production still lags behind global demand. Positive economy numbers also bolstered buying interest last week.
Crude
- The Fed is expected to boost interest rates again as the Dollar shows more strength.
- Saudi Aramco will give full contractual volumes of crude to at least 5 Asian buyers.
- Putin signed a decree that will put the Russian Government in charge of a new oil and gas project. Several companies including Exxon are expected to pull assets and resources from the project.
- On Sunday night dredging was completed and the Mississippi River reopened for ships to move. There had been a backlog of nearly 2000 vessels due to low water levels.
- The leader of the UAE will meet with Putin to discuss their cooperation and the effects of the fighting in Ukraine.
- Current estimates show that OPEC+ is lagging behind its daily goal by 3.6 million barrels per day.
- Rig counts in the US fell for the first time in four weeks.
- As of 9:27 am CST: Brent crude oil is even at $97.92, US dollar index is up 0.341 at $113.136 while the nearby e-mini S&P 500 futures contract is down 4.00 to 3,649.25
Diesel
- Renewed tensions between Russia and the US/ West are likely to lead to a diesel shortage in Europe.
- Some experts are expecting the DEC ULSD contract to test its August high at $3.90 and I tend to agree with this assumption.
- The funds also added to their long position as the market continues to rally this morning.
Gasoline
- Strikes continue at the largest refinery in France. Now French citizens are finding it challenging to fill up their tanks.
- The gasoline market may start to see some pressure as clean gasoline imports from China ramp up in the coming weeks and months.
- EIA Gas inventories are at their lowest since 2014
Propane
- 0.9250 Conway and Belvieu at 0.9175
- 56% of production is being exported currently.
- The hubs did disconnect with crude of Friday and finished lower.
Natural Gas
- Experts say that Germany could spend up to 100 billion Euros (97 billion US dollars) to subsidize gas purchases for its people.
- Henry Hub Natural Gas Futures have been hovering around the $7 mark.
- We could see the market gain some support as the demand season begins and when the Freeport export facility comes back online.
Making Sense of the OPEC+ Production Cut: Last week OPEC+ announced a 2 million barrel per day cut. It will likely not have that effect on the general supply. OPEC has failed to meet its production quotas for many months now. When you take into account the countries that are already behind as well as new production in Kazakhstan there will only be a 200,000 barrel per day loss.
