Outlook: The energy complex is soft to start the week with crude and products all trading lower. A weak Chinese growth forecast is the main market driver this morning, which may have surprised the market after the positive economic data last week. China’s economic growth last year was stunted to 3% due to covid-zero restrictions, but a strong rebound has been anticipated this year. The threat for further weakness looms tomorrow with Fed Chair Jerome Powell set to testify to congress in the morning. If the conversation leans hawkish, the market could see a further negative reaction. Non-farm payrolls will be reported on Friday this week to give the Fed one last report to chew on before the next interest rate decision.
Crude
- China set a lower-than-expected target for economic growth this year around 5%. The previous year’s growth outlook was set at 5.5%.
- Saudi Aramco increased most official selling prices for Asia to $2.50 a barrel above the regional benchmark for April. This was a 50-cent increase from March.
- Russia’s crude exports fell to 3.11 mbpd last week, marking a 14% w/w decline.
- A Sinopec official also said China should speed up the construction of its strategic oil reserve.
- Weekly crude in floating storage declined by 6.1% last week.
- ECB president Christine Lagarde said over the weekend that it is very likely the bank will raise interest rates further this month.
- Fed Chair Jerome Powell will testify before congress tomorrow to provide an overview of the economy and monetary policy.
- February 7th’s COT report showed managed money traders net long 174,615 contracts after decreasing their length by 9,873 contracts.
- As of 8:11 am CST: Brent crude oil down $1.28 to $84.54, US dollar index down $0.028 to 104.493 while the nearby e-mini S&P 500 futures contract is up 7.25 to 4057.00.
Diesel
- February 7th’s COT report showed heating oil managed money traders net sold 9,236 and are net long 13,473.
- An official at Sinopec Group’s Tianjin refinery said fuel exports should be maintained at an elevated rate to take advantage of domestic and overseas demand.
Gasoline
- February 7th’s COT report showed RBOB managed money traders net sold 10,286 contracts and are net long 57,964 contracts.
- Recent Chinese road congestion readings have softened, but should continue to find support if business activity expands.
Propane
- Conway is trading at .8700 while Belvieu is trading at .9200.
- Conway is trading at 43% of crude.
- The US is exporting 65% of production as of 2/24/23.
Natural Gas
- US Natural gas demand rose to 111.3 Bcf on Friday.
- Weekend weather runs removed 29 HDD’s through the two-week forecast.
- US natural gas rigs rose by 3 last week.
Continuous Daily WTI: The prompt WTI contract is retreating today after approaching its 100-day moving average. A surprise decline in China’s growth forecast appears to be the driver to start the week. The market will find further influence from Powell’s testimony tomorrow morning.
