Outlook: Energies are continuing the risk-off trend today with crude and products all trading lower to start the morning. The Fed and ECB will announce rate decisions Wednesday and Thursday, respectively, with both expected to increase rates by 25 bps. The tone for the June meeting may create volatility with the market undecided on whether it will see another increase or a pause. With another bank failure behind us, the market is feeling increasingly fragile with each rate hike. The fundamentals are also looking bearish today. Russia continues to show month-over-month increases in crude exports, which contradicts expectations with their pledged 500,000 bpd production cut. Additionally, India and China continue to capitalize on the cheaper offering to refine and export at higher margins. OPEC’s additional production cut begins this week, however, Reuters suggests the group’s production still remains around 1.2 million bpd below their target which could still allow room for an increase in May. The API will release its inventory survey this afternoon while Reuters is expecting draws across the board for inventories last week.
- Flows of crude from Russia’s three western ports in April rose to the highest levels in over 4 years at 2.42 mbpd, according to Bloomberg.
- India’s imports of Russian oil exceed combined flows from Saudi Arabia and Iraq last month for the first time ever, according to Vortexa data.
- China’s tourism and consumer activity rose for the first day of the five-day Labor Day holiday, with 19.7 million railway trips made across the country, which is a single day record.
- A Reuters poll suggests OPEC’s oil output fell by 190,000 bpd in April which puts them 1.2 million bpd below their output target.
- The Fed will announce its rate decision tomorrow.
- The prompt WTI contract is finding resistance at its 50 & 100-day moving averages at $76.05 and $76.66 respectively.
- The US SPR fell by 2 million barrels last week to 364.9 million barrels.
- Reuters estimates crude stocks fell by 1 million barrels last week.
- The API will report its inventory survey at 3:30 CT.
- As of 8:15 am CST: Brent crude oil down $0.75 to $78.56, US dollar index up $0.155 to 102.307 while the nearby e-mini S&P 500 futures contract is down 10.25 to 4175.00.
- Reuters estimates diesel stocks fell by 1.5 million barrels last week.
- Nymex heating oil hit oversold levels on the 9-day RSI yesterday.
- Reuters estimates gasoline stocks fell by 600,000 barrels last week.
- Chinese traffic indicators have been very positive to start the holiday week which could be supportive for global gasoline demand.
- Conway is trading at .7050 while Belvieu is trading at .7100.
- Conway is trading at 39% of crude.
- The US is exporting 56% of production as of 4/21/23.
- Yesterday, US natural gas demand rose to 99.3 Bcf/d.
- US natural gas rigs sit at 9 months lows with production up just 200 MMcf/d in 2023.
- EU gas storage rose to 59% full last week while Germany, Italy, and Austria are all over 65% full
- France’s TotalEnergies signed an LNG deal with the UAE to replace LNG previously supplied by Russia. The deal is a three-year agreement worth $1.2 billion.
Continuous Daily HO: The diesel market has continued to be the weakest amongst the complex this year. A contracting economy is bearish for diesel demand which has pressured prices. The prompt contract recently traded below its Bollinger band and has also tipped oversold on the Relative Strength Index with a value below 30.