Outlook: Energies are catching a bid for the first time this week with crude and products all observing significant gains. With the complex tipping heavily oversold this week, a rebound of some sort was inevitable. Further gains than what we’ll see today will most likely be needed to change market sentiment, however. A rebound in equities and regional bank stocks today may help reduce the odds of another closure/sale over the weekend which could be providing some security in energy for those hedging weekend needs. A story that is flying a little under the radar is that drone amidst all the macro talk is drone attacks targeting Russian refineries. While no major damage has been reported yet, further escalation could result in an unexpected disruption. Russian exports of crude and products have remained steady despite their pledged 500,000 bpd production cut.
Crude
- Another drone strike hit the Ilsky oil refinery in southern Russia today.
- Iraq’s oil minister said this week that talks with Turkey are ongoing but there is still no clarity on when flows will resume through Ceyhan.
- Yesterday, Saudi Arabia lowered oil prices to Asian customers by 25 cents for June.
- China reported the highest cargo loading data for April in 2 years with 125 super tankers and 250 million barrels of capacity en route.
- China’s April Caixin services PMI reflected expansion at 56.4 vs 56.5 est.
- US nonfarm payroll came in higher than expected at 253k vs 179k est.
- Baker Hughes will report its rig count at 12:00 CT.
- As of 8:47 am CST: Brent crude oil up $2.64 to $75.13, US dollar index up $0.252 to 101.651 while the nearby e-mini S&P 500 futures contract is up 51.25 to 4127.00.
Diesel
- AAA reports the national average diesel price at $4.087, down from $4.211 a month ago.
- Corn planting last week was at 26% complete while soybean planting was 19% complete.
Gasoline
- AAA reports the national average gas price at $3.561, up from $3.538 a month ago.
Propane
- Conway is trading at .6825 while Belvieu is trading at .6850.
- Conway is trading at 41% of crude.
- The US is exporting 62% of production as of 4/28/23.
Natural Gas
- Overnight weather runs added 2 TDDs through the two-week forecast.
- Yesterday, US natural gas demand fell to 95.0 Bcf/d.
- Demand is expected to average 93 Bcf/d over the next 7 days while production has remained steady around 100.4 Bcf/d
- The EIA reported a natural gas injection of 54 Bcf yesterday.
- Gas inventories are 507 Bcf higher than last year and 341 Bcf higher than the 5-year average.
Corn v Diesel: Joe Lardy from CHS Hedging Research provided the chart below illustrating the relationship between corn and diesel prices. With a correlation value of 83, the two commodities appear to follow similar trends. Ethanol blending in gasoline could be a key component to this correlation and is something that could tighten further.
