Outlook: Energies are mixed this morning with WTI trading lower while products edge higher. Mixed sentiment may be a consistent pattern this week until we see what the Fed decides to do on Wednesday. The stress in the banking industry is a volatile situation that is creating a risk-off dynamic in the market. The market expectation is that the Fed will still raise rates by 25 bps, however, there are calls that the Fed may pause hikes. Any further escalation of the banking liquidity crunch will put bearish pressure on the market and likely overshadow the bullish demand conversation with China. China has continued to show signs of progression out of its covid-zero policies which severely stunted its demand. Purchasing continues to grow and product exports are expected to fall sharply this month. A dovish pivot from the Fed could allow more focus to be drawn toward Chinese growth, which would provide strong support to an oversold market.
Crude
- Chinese oil refiners purchased 10 supertankers of US and Canadian crude for loadings in April.
- China imported 7.69 million tons of Crude from Russia in February, compared to 7.99 million tons in January.
- Russia’s crude exports fell by 90,000 bpd last week to 3.23 bpd but remain steady amidst an alleged 500,000 bpd production cut overall.
- Goldman Sachs is no longer forecasting $100 oil this year amid recession fears.
- Goldman Sachs believes the Fed will pause interest rate hikes this week with the banking crisis drawing larger concern.
- Canada increased its oil production last year by 168,000 bpd, short of its 200,000 bpd goal.
- WTI closed below its lower Bollinger band on Friday.
- Baker Hughes reported US oil rigs rose by 1 to 589 last week.
- Yesterday the Fed and five other central banks announced a coordinated action to increase liquidity in US dollar swap arrangements to ease banking strain.
- As of 8:15 am CST: Brent crude oil down $0.28 to $72.69, US dollar index down $0.240 to 103.468 while the nearby e-mini S&P 500 futures contract is up 10.25 to 3958.00.
Diesel
- The April-May diesel spread rose to 14.3 cents today, the highest since November.
- Global jet fuel demand is expected to rise by 0.4% this week to 5.66 mbpd, according to Bloomberg data.
- China shipped 574,000 bpd of diesel in January and February but expects an 80% reduction in March.
Gasoline
- The prompt RBOB crack is up again today to its highest level since July.
- China shipped around 280,000 bpd of gasoline in January and February.
Propane
- Conway is trading at .7000 while Belvieu is trading at .7300.
- Conway is trading at 44% of crude.
- The US is exporting 72% of production as of 3/10/23.
Natural Gas
- US Natural gas demand fell to 108.1 Bcf yesterday.
- Weekend weather runs were unchanged through the two-week forecast.
- US natural gas rigs increased by 9 last week to 162.
Chinese Oil Purchasing: WTI crude has seen its discount to Asia’s Oman crude widen which could provide China with more incentive to purchase US crude. US crude exports have already seen record levels this year and this dynamic will likely help maintain that. A lower US dollar may also contribute to the global appetite for US crude.
