Outlook: The energy complex is looking to extend its weakness today after a technical breach yesterday. Prompt WTI and RBOB both closed below their 9-day moving averages yesterday which can signal a short-term trend change. Overall, the headlines were relatively supportive overnight with China’s GDP coming in above estimates and a report of record crude processing. China’s economic growth appears to be on track with where analysts are predicting it for 2023 which is a key driver for energies. Additionally, the US dollar is taking a softer tone which is another supportive element that is being overshadowed this morning. The market could still be pricing in concern of domestic demand loss and the threat of an additional rate hike next month but from a broader scope, energies may have established a middle-ground for now.
Crude
- China’s GDP grew 4.5% in Q1 vs 4% est.
- China’s refinery throughput rose to a record level of 14.9 mbpd in March.
- Oil flows through the Turkish port of Ceyhan have yet to resume despite further progress in negotiations between Iraq and the Kurdistan Regional Government.
- Yesterday, the EIA released its drilling productivity report with the expectation for US crude production to increase by 49,000 bpd in April and May.
- The US SPR fell by 1.6 million barrels last week to 380 million barrels.
- Reuters estimates crude stocks fell by 2.5 million barrels last week.
- The API will report its inventory survey at 3:30 CT.
- As of 8:12 am CST: Brent crude oil down $0.30 to $84.46, US dollar index down $0.259 to 101.842 while the nearby e-mini S&P 500 futures contract is up 17.25 to 4194.00.
Diesel
- Reuters estimates diesel stocks fell by 1.8 million barrels last week.
- Commercial passenger jet fuel demand is expected to grow 1.1% w/w through next week.
- Group 3 basis has cooled off from its recent highs with storage throughout the country reaching capacity.
Gasoline
- Reuters estimates gasoline stocks fell by 1.9 million barrels last week.
- RBOB is leading the complex lower again despite previously being the most supported market. Technical selling may be the main driver for the downward move this week.
Propane
- Conway is trading at .8300 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.
Natural Gas
- Overnight weather runs removed 2 TDDs through the two-week forecast.
- Yesterday, US natural gas demand fell to 97.3 Bcf/d.
- European gas stocks are 55% full, a level reached 11 weeks earlier than in 2021.
Chinese Demand: Chinese oil demand is hitting record levels as it recovers from strict covid-zero policies. According to government data, refiners processed 63.29 million tons of crude in March, up 8.8% from year-ago levels. 14.97 million bpd represents the largest daily volume on record, according to Bloomberg calculations.
