Outlook: Energies are looking to extend their run today with crude and diesel edging higher while gasoline lags behind. The market is still in the process of assessing the implications of OPEC’s surprise production cut on Wednesday. A supply deficit was already anticipated by many for the second half of 2023 before the cut, which may now be on an accelerated path. The US said last week that they still intended to purchase oil to refill the SPR by the end of the year, however, that window looks to be all but shut given the price jump. Economic downturn still poses a significant risk to demand. Soft manufacturing data released yesterday could be a signal of the effects of elevated interest rates and the effects on lending. Crude inventories in the US have shifted to draws over the last several weeks however a fresh round of SPR releases starting this month could slow that down. Reuters is estimating crude and product inventories all declined last week.
Crude
- A Bloomberg survey suggests OPEC+ oil production fell by 80,000 bpd in March to 29.16 mbpd.
- OPEC+ including Russia will be cutting 3.66 mbpd of oil production starting in May.
- Iraq will begin exporting oil through the Turkish port of Ceyhan today.
- Saudi Arabia’s crude exports rose to 7.35 mbpd in March, compared to 6.99 mbpd in February, according to Bloomberg data.
- Marathon’s Washington refinery began shutting down units for a 7-8 week turnaround. The unit paused 199,000 bpd of crude processing on March 30th.
- May WTI closed above its 200-day moving average yesterday.
- The API will report its inventory survey this afternoon at 3:30 CT.
- Reuters estimates crude stocks fell by 1.8 million barrels last week.
- US manufacturing data fell to its lowest level in nearly three years in March.
- As of 8:12 am CST: Brent crude oil up $0.87 to $85.80, US dollar index up $0.006 to 102.099 while the nearby e-mini S&P 500 futures contract is up 8.25 to 4161.00.
Diesel
- Reuters estimates diesel stocks fell by 100,000 barrels last week.
- A contracting economy can be a bearish driver for diesel prices as diesel demand drops.
- Diesel exports from Russia’s Baltic port of Primorsk hit their highest level since 2016 at 502,000 bpd in March.
Gasoline
- Reuters estimates gasoline inventories fell by 1.4 million barrels last week.
- Gasoline imports from Europe are behind on a y/y basis which could further pressure inventories as we head in to driving season.
Propane
- Conway is trading at .8050 while Belvieu is trading at .8300.
- Conway is trading at 42% of crude.
- The US is exporting 76% of production as of 3/24/23.
- Propane saw a significant bounce yesterday but remains cheap in value in relation to crude.
Natural Gas
- Overnight weather runs removed 12 TDDs through the two-week forecast.
- Yesterday, US natural gas demand fell to 100.1 Bcf/d.
- 75% of all US natural gas cargoes went to Europe in March.
- The US made up over 45% of European LNG volumes in 1Q23.
Gasoline Imports: Europe’s gasoline exports to the US are expected to decline by as much as 100,000 bpd from March to April, according to Wood Mackenzie. US gas stocks are at 9-year seasonal lows as the summer driving season approaches. French refinery strikes and OPEC’s production cuts have set up a bullish scenario for pump prices this summer.
