Outlook: Energies are trying to hold on to small gains this morning as the upward trend continues. Positive Chinese sentiment is trying to take control of this market to establish a steady bullish trend. Oil supplies are ample as it sits today which has kept the market at bay, however, a strong demand forecast for China and India is expected to eat away at the current surplus by the end of the year. OPEC continues to produce at levels under target, which could allow the spare capacity concerns to resurface if global demand continues to grow. Limited spare capacity and underinvestment in oil infrastructure was a major oil driver pre-war but has flown a little under the radar again amidst demand destruction. The threat of further demand destruction is still looming which has tamed the upside movements. Additional interest rate hikes are expected this year as several countries look to dampen elevated inflation.
Crude
- JP Morgan believes that Russia can maintain oil production at pre-conflict levels.
- Bloomberg estimates OPEC increased production by 120,000 bpd to 29.24 mbpd last month.
- China’s seaborne imports of Russian oil are set to hit a record this month at 43 million barrels, according to Vortexa and Kpler tanker tracking data.
- The Biden administration is satisfied with India’s Russian oil purchases at a price well below the price cap, stating it’s good for stimulating the economy and stabilizing the market.
- US crude in floating storage declined by 40% to 79.5 million barrels in 2022, according to the EIA.
- US crude inventories rose by 1.1 million barrels last week.
- US crude exports rose to a record 5.6 mbpd last week.
- The prompt continuous daily WTI contract closed above its 50-day moving average yesterday near $77.66.
- Euro-area inflation slowed by less than expected last month, which could influence the ECB to increase rates further.
- As of 7:49 am CST: Brent crude oil up $0.03 to $84.34, US dollar index up $0.583 to 105.066 while the nearby e-mini S&P 500 futures contract is down 22.25 to 3934.00.
Diesel
- There was a fire reported at BP’s Rotterdam refinery today. The refinery has two units that process a total of 200,000 bpd.
- The EIA reported diesel stocks rose by 180,000 barrels last week.
- Diesel demand was up 1.7% w/w.
- Diesel demand remains 10.7% below year-ago levels for this time of year.
Gasoline
- The EPA is proposing expanded sales of higher-ethanol gasoline in the Midwest to take place in 2024.
- The EIA reported gasoline stocks fell 873,000 barrels last week.
- Gasoline demand rose 2.3% w/w to climb back over 9mbpd.
- Gasoline demand remains 1.4% below year-ago levels for this time of year.
- Gasoline demand on the east coast fell to its lowest level in 25 years when excluding 2020.
Propane
- Conway is trading at .8075 while Belvieu is trading at .8625.
- Conway is trading at 43% of crude.
- The US is exporting 65% of production as of 2/24/23.
- The EIA reported propane stocks fell by 2.7 million barrels last week.
Natural Gas
- US Natural gas demand fell to 107.1 Bcf yesterday.
- Overnight weather runs removed 10 HDD’s through the two-week forecast.
- The EIA is expected to report a 79 Bcf withdrawal for last week.
Continuous Daily WTI: The prompt WTI contract managed a close above its 50-day moving average yesterday (Blue Line). Positive Chinese sentiment has helped the market retain its upward trend. WTI may look to test its 100-day moving average (Purple Line) over the next several sessions if strength continues. Continuous WTI has not managed a close above its 100-day since early November!
