Outlook: Energies are being sold today while they look to hang on to weekly gains. Volatility has continued to drop with crude and products looking relatively rangebound. Chinese demand continues to be the bullish priority while widespread recessionary threats have acted as an anchor to upside moves. This is a dynamic we will likely continue to see until market fundamentals reveal to us which side has a greater influence.
The Wall Street Journal released a report today stating the UAE is considering leaving OPEC in a move to produce more oil. Currently, the UAE has capped production to remain compliant with OPEC, if they were to leave, they would be a source of additional oil supply to the market. WTI briefly dipped below $76 upon the release of the headline but has since recovered from its low.
- The UAE is having an internal discussion about leaving OPEC, according to the Wall Street Journal.
- The UAE has privately pushed OPEC+ to let it produce more oil.
- China’s service sector expanded at its fastest pace in six months in February.
- A Reuters poll suggests the US dollar will trade lower against all major currencies in the next 12 months.
- A lower dollar may help the US maintain strong oil exports with Russia, Brazil, and Iraq all lowering outbound flows.
- Strong US labor market data typically supports energy; however, it is currently fueling a hawkish Fed stance that flips the narrative.
- Yesterday, the US enforced sanctions on 11 firms that transported or sold Iranian oil.
- The prompt Brent crude spread has widened to its highest level since November.
- As of 8:34 am CST: Brent crude oil down $1.83 to $82.92, US dollar index down $0.264 to 104.764 while the nearby e-mini S&P 500 futures contract is up 16.25 to 4001.00.
- According to Bloomberg, Russia plans to raise its seaborne diesel exports in March by 1.3% over February.
- European diesel-type stocks at the ARA hub all declined this week.
- AAA reports the national average retail diesel price at $4.388, down 6 cents from a week ago.
- European gasoline stocks at the ARA hub declined this week.
- AAA reports the national average retail gas price at $3.39, up a half cent from a week ago.
- Conway is trading at .8250 while Belvieu is trading at .8900.
- Conway is trading at 43% of crude.
- The US is exporting 65% of production as of 2/24/23.
- An Oct23-Mar24 propane swap was seen offered at 94.5 cents yesterday. Please inquire for quotes if you are looking for additional coverage or relay price targets for us to watch.
- US Natural gas demand rose to 110.9 Bcf yesterday.
- Overnight weather runs added 2 HDD’s through the two-week forecast.
- The EIA reported an 81 Bcf withdrawal for last week.
Basis Swaps: High Atlantic Ocean temperatures with a mild winter on the East Coast could contribute to a more active hurricane season this year. A basis swap contract can offer protection against future upside influences like hurricanes. Group 3 October basis swaps settled at 4.75 cents yesterday. Please reach out for firm values or if you have questions on how this could fit with your current risk management strategy.