Outlook: Energies are finding strength this morning with crude and products looking to post a weekly gain. WTI managed a close above its 50-day moving average yesterday and may look to test its 100-day near $81.10 as its next line of resistance. Headlines are providing influence today with Russia announcing they intend to cut March crude production by 5%. While Russian oil has been finding a home in countries not participating in sanctions, the heavily discounted price is taking a toll on revenues. If crude exports also decline, global product supply could tighten with countries like China and India offered less cheap oil to refine and sell to sanction participating countries. Macroeconomics will remain a significant downside threat due to recession risk. Look for volatility to continue with many global interest rates reaching terminal zones and the uncertainty around the inflationary reaction.
Crude
- Deputy Prime Minister Alexander Novak said on Friday that Russia plans to reduce its crude oil production in March by 500,000 bpd (5% of output).
- Russia’s central bank held its key interest rate at 7.5% today. Their annual inflation was running at 11.8% as of Feb 6th.
- China’s January PPI fell .8% vs .5% expected and their CPI rose 2.1% vs 2.2% expected, according to the NBS. (Bearish)
- Reuters spoke privately to five OPEC officials about the prospect of $100 oil this year, with three stating a rally is more likely than a decline.
- Goldman lowered its 2023 Brent price forecast to $92 from $98.
- Baker Hughes will report its rig count at 12:00 CT.
- Michigan consumer sentiment will be posted at 9:00 CT.
- As of 8:10 am CST: Brent crude oil up $1.10 to $85.60, US dollar index up $0.113 to 102.334 while the nearby e-mini S&P 500 futures contract is down 18.25 to 4073.00.
Diesel
- Russia has said they are likely to prioritize diesel exports over crude following the recent round of sanctions due to better pricing.
- Despite the recovery in refinery utilization, a swath of turnarounds this spring may cap or reduce gains.
Gasoline
- Continuous daily RBOB is testing its 100-day moving average today near $2.4809.
- AAA reports the national average gas price at $3.431, down from $3.491 last week.
Propane
- Conway is trading at .8175 while Belvieu is trading at .8575.
- Conway is trading at 44% of crude.
- The US is exporting 59% of production as of 1/27/22.
Natural Gas
- US natural gas demand rose to 106.7 Bcf/d yesterday.
- Overnight weather runs removed 10 HDDs through the two-week forecast.
- The EIA reported a 217 bcf withdrawal from storage for last week.
- The 5-year average draw is 171 Bcf.
Continuous Daily RBOB: The prompt RBOB contract is testing its 100-day moving average today (Purple Line). A close above this level could indicate further upside and target the January highs around $2.70. RBOB has recovered over ~17 cents this week following last week’s selloff.
