Outlook: Energies have maintained the strength they established during yesterday’s shortened holiday session. The overall narrative in the market has shifted bullish for the early part of this week with the focus narrowing in on Chinese demand. Limiting the upside has been sustained exports despite the purchasing uptick. Additionally, a large majority of oil purchases have come from Russia which is aiding the global supply chain to rebalance post-sanctions. Russia is also finding a way to move diesel which many analysts predicted would be a much steeper hill to climb. A sharp discount is starting to develop for those who are purchasing it, similar to crude. US inventories and a slough of macroeconomic reports will come into play towards the end of the week which could bid for control of the market. Diminishing macroeconomic sentiment has proven to be a strong bearish market driver over the last few weeks.
Crude
- India’s state-owned refiner Hindustan Petroleum is facing payment issues for Russian crude due to price caps being imposed, according to Bloomberg.
- Kazakhstan may temporarily halt crude flows through the CPC on Russia’s Black sea coast due to bad weather, according to Bloomberg.
- President Putin said Russia will suspend the New START nuclear weapons treaty, which marked the last accord with the US limiting their strategic arsenal.
- Russian crude and fuel oil exports to China reached a record 1.66 mbpd last month, according to Kpler data as of 2/20.
- China is purchasing Russian Urals at nearly a 50% discount, according to Bloomberg citing ICE and Argus Media.
- The API will report its inventory survey tomorrow due to the Monday holiday.
- March WTI is set to expire today.
- As of 8:14 am CST: Brent crude oil down $0.69 to $83.37, US dollar index up $0.185 to 104.043 while the nearby e-mini S&P 500 futures contract is down 35.25 to 4051.00.
Diesel
- Russian diesel costs around $35 less than non-Russian products per Bloomberg data.
- Vortexa data shows that diesel-type exports from Russia in the first half of this month have only been surpassed on a monthly average nine times in over seven years.
- Russian diesel exports are down 150,000 bpd m/m.
Gasoline
- Congestion in major Chinese cities was the busiest since the start of 2022, according to BloombergNEF.
- Increasing congestion in China could result in a decrease in fuel exports.
Propane
- Conway is trading at .8050 while Belvieu is trading at .840.
- Conway is trading at 43% of crude.
- The US is exporting 78% of production as of 2/10/23.
Natural Gas
- US Natural gas demand rose to 107.7 Bcf.
- Overnight weather runs removed 11 HDDs through the two-week forecast.
- US natural gas rigs rose by 1 last week to 151.
Continuous Daily WTI: March crude is set to expire today, with the continuous chart testing its 50-day moving average for resistance. The market narrative this week has shifted lightly bullish with the focus targeting Chinese oil purchases. The upside is being capped with a large amount of China’s oil purchases coming from Russia as they take advantage of steep discounts.
