Outlook: Energies are mixed again to start this morning with products moving higher while crude lags lower. A late rally yesterday appears to have been unconvincing for continuation as uncertainty around market stability keeps a lid on upside moves. Various big banks have stepped in to provide cash injections to others in need which has briefly tamed the fears of a liquidity crisis. The industry is not out of the woods, however, with the Fed still expected to increase rates by 25 bps next week. The fear-driven selloff has caught OPEC’s attention this week, however, they remain consistent with their opinion that the current 2 mbpd cut in oil production is adequate for the current supply and demand dynamic. There is no plan to meet any sooner than their original meeting date scheduled for June. The US also addressed replenishing the SPR this week as prices have entered their target range, but they reiterated that they are in no rush. Risk-off may keep markets suppressed until the Fed meets next week.
Crude
- Saudi Arabia and Russia met yesterday to discuss market stability and both parties affirmed their commitment to the current OPEC+ decision of cutting 2 mbpd.
- Four delegates from OPEC+ told Reuters they consider this week’s slide in oil to be driven by financial fear and not a supply and demand imbalance.
- OPEC+ is not scheduled to meet again until June.
- Special Presidential Coordinator for Global Infrastructure and Energy Security Amos Hochstein said the US is committed to replenishing the SPR but will not rush to do so.
- Goldman Sachs raised their 12-month recession probability to 35% yesterday.
- Several banks stepped in yesterday to inject $30 billion into First Republic Bank to tame fears of a liquidity crisis.
- The Federal Reserve will meet next Tuesday and Wednesday to announce its next rate decision.
- The ECB increased interest rates by 50 bps yesterday.
- As of 8:02 am CST: Brent crude oil down $1.53 to $73.17, US dollar index down $0.198 to 104.220 while the nearby e-mini S&P 500 futures contract is down 28.25 to 3931.00.
Diesel
- The prompt diesel crack has risen ~$5 this week and is trading back over $45.
- The prompt diesel spread up nearly 6 cents this week with a high over 12 cents today.
Gasoline
- Continuous daily RBOB is challenging support near its 50 & 100-day moving average today.
- The prompt RBOB crack is up ~$3 this week.
Propane
- Conway is trading at .6950 while Belvieu is trading at .7250.
- Conway is trading at 43% of crude.
- The US is exporting 72% of production as of 3/3/23.
- The EIA reported an unexpected build of 917,000 for propane stocks last week.
Natural Gas
- US Natural gas demand fell to 111.0 Bcf yesterday.
- Weekend weather runs removed 2 HDDs through the two-week forecast.
- The EIA reported a 58 Bcf withdrawal from storage for last week.
- The 5-year average draw is 77 Bcf.
Diesel Backwardation: The backwardation in the diesel market has expanded this week as it looks to push to its highest level in over 2 months. Tight supplies, growing demand, and reports of record Russian diesel in floating storage are the likely drivers for growth this week.
