Outlook: Energies are starting the week off on a softer tone with crude and products trending lower. Negative macroeconomic sentiment is back in the driver's seat with the expectations of further rate hikes threatening demand. Products have shifted near oversold levels on short-term RSI metrics and crude is finding technical support near consolidating moving averages around $76.50. Overall, the market may linger in risk-off mode with the next round of rate decisions slated for next week. Fresh bullish drivers have been relatively absent over the last week and a continuation of that trend will likely lend the market further downside. While analysts remain optimistic on Chinese demand growth, reports of steady Russian oil exports are acting to offset momentum as one of their leading suppliers. Russian exports and refinery runs have yet to reflect the pledged production cuts for March.
Crude
- Chinese customs data on Friday showed the country imported record oil volumes in March, importing over 2 mbpd from both Russia and Saudi Arabia.
- According to Bloomberg tanker-tracking data, Russia’s crude exports have stayed strong averaging 3.4 mbpd last week, reflecting no signs of the pledged output cuts.
- India is reportedly purchasing some of its Russian oil above the price cap, per oil secretary Pankaj Jain.
- Two oil tankers have departed empty from near Ceyhan with doubts that flows will return soon, with the governments involved still stuck in a standoff.
- Last week’s COT report showed crude oil managed money traders added 13,948 contracts and are net long 212,190 contracts.
- The hedge fund net long WTI positions rose to its highest level since November of 2022, with traders still banking on a tightening marketplace to end the year.
- Baker Hughes reported US oil rigs rose by 3 last week, which marked the first weekly increase in a month.
- As of 8:17 am CST: Brent crude oil down $0.68 to $80.98, US dollar index down $0.311 to 101.511 while the nearby e-mini S&P 500 futures contract is down 1.25 to 4155.00.
Diesel
- Last week’s COT reports showed HO managed money traders decreased their length by 3,330 contracts and are net long 13,917 contracts.
- Chinese jet fuel demand is expected to surge this quarter with travelers expected vacation abroad during the Golden Week holiday in early May.
- 170 million Chinese vacationed abroad in 2019 pre-pandemic compared to 9 million last year, leaving room for significant growth.
- Nymex heating oil is near oversold territory on a 9-day RSI basis
Gasoline
- Last week’s COT report showed RBOB managed money traders added 2,402 contracts and are net long 64,696 contracts.
- Last week’s gasoline inventory build was the first build in 9 weeks.
- Nymex gasoline is near oversold territory on a 9-day RSI basis
Propane
- Conway is trading at .8075 while Belvieu is trading at .8100.
- Conway is trading at 43% of crude.
- The US is exporting 73% of production as of 4/14/23.
Natural Gas
- Overnight weather runs added 9 TDDs through the two-week forecast.
- Yesterday, US natural gas demand fell to 96.2 Bcf/d.
- Baker Hughes reported natural gas rigs rose by 2 to 159 last week.
Continuous Daily WTI: The prompt WTI contract is finding support along its 100 & 50 – day moving averages. Demand destruction fears amidst a tightening economy is the key bearish driver for the oil market right now. A breach of support could allow another drop below $75, however, the US might not pass up another purchasing opportunity for the SPR which could re-establish the floor around $72.
