Outlook: Energies are starting the morning mixed again with a lack of conviction ahead of the Fed rate decision tomorrow. The consensus has continued to grow for the Fed to increase rates by 25 bps tomorrow. With the consensus looking like middle ground, it's very hard to predict how the market may digest that figure. However, I don’t anticipate the market will develop a bullish trend strictly on monetary tightening, even in the event of a dovish pivot. There is still a lot of concern surrounding the banking crisis and as long as rates stay high, there is significant downside risk. Markets are relatively oversold and there appears to be a chunk of fund buying available with the net spec and fund length at their lowest level since 2013. If supplies do begin to tighten heading into June, we are set up for a swift market move higher, especially with Funds ready to jump back in.
Crude
- Russia has surpassed Saudi Arabia as China’s biggest oil supplier after purchasing nearly 2 million bpd last month.
- Vitol CEO said they see about 300,000 bpd of cuts in Russian exports so far.
- Goldman Sachs' head of commodities says we will see an oil deficit develop by June and it will drive prices higher.
- The G7 said they will hold off on revising the Russian oil price cap this week. The group is due to revise the cap this month.
- France’s largest refinery is set to shut down due to ongoing strikes. The Normandy refinery can process 247,000 bpd of crude which is 20% of France’s entire capacity.
- The United States Oil Fund (USO) saw its biggest inflow since early December.
- The Fed will announce its rate decision tomorrow at 1:00 CT.
- Reuters estimates crude stocks fell by 1.4 million barrels last week.
- The API will report its inventory survey this afternoon at 3:30 CT.
- As of 7:08 am CST: Brent crude oil up $0.83 to $74.62, US dollar index down $0.210 to 103.075 while the nearby e-mini S&P 500 futures contract is up 34.25 to 4017.00.
Diesel
- Reuters estimates diesel stocks fell by 1.5 million barrels last week.
- France has been releasing strategic fuel stocks since the beginning of March to prevent shortages amidst protests.
Gasoline
- Reuters estimates gasoline stocks fell by 1.4 million barrels last week.
- The NYMEX gasoline crack rose $1.49 to $38.21 yesterday to its highest level since July.
Propane
- Conway is trading at .6800 while Belvieu is trading at .7200.
- Conway is trading at 43% of crude.
- The US is exporting 72% of production as of 3/10/23.
Natural Gas
- Elevated inventories, strong production, and weak demand have all contributed to the downside in natural gas as of late.
- Look for the market to find direction from a mixture of HDDs and CDDs during this seasonal transition.
Weekly WTI: The weekly WTI contract has found support near its 200-week moving average at $66.22. With the Fed facing a pivotal decision tomorrow, any bearish sentiment could challenge this support again. Secondary support may lie near $62.50, which was the low in the first week of December 2021.
