Outlook: The energy complex has cooled off today with WTI rejecting its 200-day moving average. Tightening inventories and an OPEC production cut have shifted the narrative away from recessionary concerns over the last few weeks. OPEC released its monthly report today and stated they expect a 2 million bpd oil deficit by the fourth quarter of this year. They also revised up China’s oil demand by 50,000 bpd. China and India remain the major growth drivers for 2023 in the absence of economic tightening similar to other major countries. China continues to show signs of growth with oil imports up 16% in March. The IEA will release its monthly report tomorrow morning to give us further insight before the week concludes. If economic reports continue to be responsive to elevated interest rates, fundamental tightness may maintain bullish control.
Crude
- China’s oil imports reached 12.37 mbpd in March, their highest level since June 2020 and 16% higher than in February.
- OPEC estimates the global oil market will be undersupplied by 2 million bpd in the fourth quarter of this year.
- OPEC revised China’s oil demand for 2023 to 760,000 bpd, up from 710,000 bpd previously.
- OPEC revised up Russia’s crude output to 10 mbpd in February, 200,000 bpd higher than their previous estimate.
- The International Monetary Fund said on Tuesday, for every 10% rise in oil prices, IMF models show a 0.1 percent reduction in growth and a 0.3 percent increase in inflation.
- The WTI prompt spread has risen nearly 50 cents since the start of the year and has returned to backwardation.
- Nearby WTI is finding resistance at its 200-day moving average at $83.73.
- Yesterday, US energy Secretary Jennifer Granholm announced continued focus to refill the SPR this year if advantageous to taxpayers.
- The EIA reported US crude stocks rose by 597,000 barrels last week.
- The US SPR fell by 1.6 million barrels last week.
- As of 7:38 am CST: Brent crude oil down $0.35 to $86.98, US dollar index down $0.201 to 101.299 while the nearby e-mini S&P 500 futures contract is up 9.25 to 4128.00.
Diesel
- The return of French refineries are expected to add 125,000 bpd of regional diesel supply to Europe, according to Bloomberg.
- The EIA reported diesel stocks fell by 606,000 barrels.
- US diesel demand fell 11.3% w/w to 3.7 mbpd
Gasoline
- The EIA reported US gasoline stocks fell by 330,000 bpd last week.
- US gasoline demand fell by 3.9% w/w to 8.9 mbpd.
Propane
- Conway is trading at .8350 while Belvieu is trading at .8450.
- Conway is trading at 42% of crude.
- The US is exporting 60% of production as of 4/7/23.
- The EIA reported US crude inventories rose 469,000 barrels last week.
Natural Gas
- Overnight weather runs were unchanged through the two-week forecast.
- Yesterday, US natural gas demand fell to 89.9 Bcf/d.
- The EIA is expected to report at 28 Bcf injection into storage for last week.
Continuous Daily RBOB: The prompt RBOB contract is trading at its highest levels since October. Inventories continue to tighten and despite a week-over-week decline in demand, four-week average demand remains strong relative to year-ago levels. Look for $3 to act as psychological resistance and $3.0221 to follow, representing the October high.
