Outlook: Energies are moving lower to start the morning with what appears to be an extension of the weakness from yesterday’s EIA data. Larger-than-expected builds in products were fueled by an increase in refinery utilization and imports weighed heavily on the market yesterday. Despite the weakness, there is a slew of bullish headlines involving outages and increased buying from China. It appears the market is not convinced it is ready to break out of the downtrend with the feeling of a bloated global petroleum supply. While data suggests China is making progress in demand recovery, it hasn’t been to a level that meets trade expectations. More clarity could be provided as we transition deeper into the year and receive more data. Until then, it may take a significant supply disruptor to change the current momentum lower.
Crude
- According to Energy Aspects, China’s daily oil imports from Russia could increase by as much as 500,000 bpd this year to 2.2 million bpd.
- Bloomberg reports indicate China’s Unipec has bought at least 15 cargoes of Middle East oil with another large refiner purchasing 2 million barrels for March loadings.
- Kazakh crude production has dropped by 200,000 bpd over the past week due to maintenance, according to the nation’s Information-Analytical Centre of Oil & Gas.
- According to Reuters, oil and product exports from the Russian Black Sea ports of Novorossiisk and Tuapse have been suspended due to a storm.
- Exports of Azeri oil from Turkey are unlikely to resume until late next week, according to Bloomberg. These flows accounted for 615,000 bpd last month.
- The EIA reported crude stocks rose by 2.4 million barrels last week.
- Net crude imports rose by 367,000 bpd last week per EIA data.
- US crude production rose by 100,000 bpd to 12.3 mbpd and its highest level since April of 2020.
- As of 8:12 am CST: Brent crude oil down $0.50 to $84.59, US dollar index down $0.766 to 102.645 while the nearby e-mini S&P 500 futures contract is up 32.25 to 4162.00.
Diesel
- The EIA reported a larger-than-expected build of 2.9 million barrels for diesel stocks.
- Diesel imports last week increased by 121.1% to 692,000 bpd.
Gasoline
- The EIA reported a larger-than-expected build of 5 million barrels for gasoline stocks.
- Gasoline imports increased 97% last week to 989,000 bpd.
Propane
- Conway is trading at .8050 while Belvieu is trading at .8475.
- Conway is trading at 42% of crude.
- The US is exporting 59% of production as of 1/27/22.
- The EIA reported propane stocks fell by 4.3 million barrels last week.
Natural Gas
- US natural gas demand rose to 108.7 Bcf/d yesterday.
- US dry production fell by 0.6 Bcf/d yesterday.
- Overnight weather runs removed 2 HDDs through the two-week forecast.
- The EIA is expected to report a 197 Bcf withdrawal from storage for last week.
- The 5-year average draw is 171 Bcf.
Oil Liquidity: Traders have added nearly 850 million barrels of contracts across the benchmarks of the main oil futures this year according to Bloomberg exchange data. The volatility and elevated margin requirements observed in 2022 flushed many traders out of the mark. WTI contract open interest is up more than 20% YTD.
