Outlook: Energy markets are tumbling again today after the sharp selloff yesterday. The macros are the key driver in this move with further stress in the banking industry and the Fed likely increasing interest rates further today. The market is expecting verbiage from the Fed to hint at a rate pause for their June meeting, and we could see volatility based on how that’s presented. Global demand has also softened recently with poor data coming from China over the weekend. A deceleration in Chinese demand growth has been quickly beaten up by increasing oil exports out of Russia to assist in the weakness this week. It looks like a drastic shift in the narrative will be necessary to turn this market around with bullish market drivers few and far between. The weakness in crude has dropped prices to where the US expressed intentions to purchase SPR barrels, however, we saw these levels back in March and no action was taken. We’ll wait to see the bottom before we react to a purchasing decision or lack thereof.
Crude
- Yesterday WTI saw its largest one-day percentage decline since early January.
- Yesterday Treasury Secretary Yellen warned the US government could run out of money within a month if no adjustments are made regarding the debt ceiling.
- Morgan Stanley dropped its Brent oil forecast to $75 by year-end.
- The Fed will announce its rate decision today and the ECB will announce tomorrow. Expectations are for both to increase rates by 25 bps.
- The US SPR fell by 2 million barrels last week to 364.9 million barrels.
- Reuters estimates crude stocks fell by 1.1 million barrels last week.
- An industry survey yesterday afternoon showed crude stocks fell by 3.9 million barrels last week, according to sources citing the API.
- As of 7:52 am CST: Brent crude oil down $2.00 to $73.32, US dollar index down $0.339 to 101.620 while the nearby e-mini S&P 500 futures contract is up 5.25 to 4142.00.
Diesel
- Reuters estimates diesel stocks fell by 1.1 million barrels last week.
- An industry survey yesterday afternoon showed diesel stocks fell by 1 million barrels last week, according to sources citing the API.
Gasoline
- Reuters estimates gasoline stocks fell by 1.2 barrels last week.
- An industry survey yesterday afternoon showed gasoline stocks rose by 400,000 barrels last week, according to sources citing the API.
Propane
- Conway is trading at .6750 while Belvieu is trading at .6800.
- Conway is trading at 39% of crude.
- The US is exporting 56% of production as of 4/21/23.
- OPIS estimates propane inventories rose by 1.5 million barrels last week.
- We are seeing 2024-25 winter swap values below 75 cents. Please reach out for updated offers if you would like to extend some coverage to take advantage of this dip.
Natural Gas
- Overnight weather runs were unchanged through the two-week forecast.
- Yesterday, US natural gas demand rose to 100.6 Bcf/d.
- US dry production has average 100.4 Bcf/d YTD, up 5.6 Bcf/d from the same period last year.
Continuous Daily WTI: The selloff continues today with WTI breaching support at $70. $67 may act as a psychological floor representing the lower end of the range that the US said they were targeting to refill the SPR. Look for the market to test that value if demand comes in soft today or the Fed’s tone leans hawkish.
