Outlook: The energy complex is sliding lower again this morning as the bearish economic view continues to grow. Supportive January retail sales have helped the US dollar work sharply higher today which may be putting pressure on energies. The Fed made comments yesterday that interest rates will need to be steadily increased until inflation is tamed. The fundamentals have also continued to look bearish with an industry group survey showing a much larger than-expected build in crude inventories for last week. It’s likely we will see healthy net imports again this week if the EIA confirms this large build when it releases data this morning. The Chinese have continued to ramp up oil purchases signaling positive demand growth; however, the market appears more focused on a global supply surplus in the near term. It may take a shift in the economic narrative and drawdowns in supply before the market can fully break out of its current range.
Crude
- The IEA indicated that Russian crude exports in January were only 160,000 bpd below pre-war levels.
- The IEA increase their 2023 global oil demand forecast by 100,000 bpd to 101.9 mbpd.
- Libya’s National Oil Corporation said it will increase oil production to 2 million bpd over the next 3-5 years. They currently produce 1.2 million bpd.
- The Fed said Tuesday that the US central bank will need to maintain a gradual increase in interest rates to beat inflation.
- Reuters estimates crude stocks rose by 1.2 million barrels last week.
- An industry survey yesterday afternoon showed crude stocks rose by 10.5 million barrels, according to sources citing the API.
- US retail sales grew 3% m/m vs 1.8% est.
- As of 8:00 am CST: Brent crude oil down $0.75 to $84.83, US dollar index up $0.557 to 103.761 while the nearby e-mini S&P 500 futures contract is down 16.25 to 4128.00.
Diesel
- Reuters estimates diesel stocks rose by 400,000 barrels last week.
- An industry survey yesterday afternoon showed diesel stocks rose by 1.7 million barrels last week, according to sources citing the API.
Gasoline
- Reuters estimates gasoline stocks rose by 1.5 million barrels last week.
- An industry survey yesterday afternoon showed gasoline stocks rose by 846,000 barrels last week, according to sources citing the API.
Propane
- Conway is trading at .7900 while Belvieu is trading at .8275.
- Conway is trading at 42% of crude.
- The US is exporting 59% of production as of 2/3/23.
- OPIS sees propane stocks falling by 2.35 million barrels last week.
Natural Gas
- US natural gas demand fell to 106.6 Bcf/d yesterday.
- Overnight weather runs added 8 HDDs through the two-week forecast.
- The El Paso natural gas pipeline is resuming service on its Line 2000 segment after being shut down following an incident in August 2021. The segment moves gas from the Permian to California.
Continuous Daily US Dollar: The US dollar is moving sharply higher today after a positive retail sales posting and hawkish comments from the Fed yesterday. If the dollar breaks out higher, it could bring additional downside pressure on commodities. A higher dollar makes it more expensive for non-dollar currency holders to purchase dollar-denominated commodities.
