Outlook: The energy complex is mixed to start today’s session but has bounced off the lows following the CPI report. US inflation rose less than expected at 4.9% y/y with the market expecting 5%. Although it’s a minor adjustment below expectation, it reflects the notion of an interest rate pause when the Fed meets next month. If economic reports continue to support the Fed pause narrative, we see that as support for energy prices. On the fundamental front, inventories are generally mixed for projections with a survey yesterday afternoon showing a surprise build in crude. Gasoline inventories also have a chance to see a build on the back of elevated imports from Europe. Overall gasoline demand has been strong on a rolling average basis while diesel demand lags 5-year average levels. The US SPR is expected to draw down through June, while the US announced yesterday it still intends to refill the reserve once maintenance ends later this year.
Crude
- China’s April crude imports fell by 16.2% m/m, according to customs data.
- Yesterday, the Biden administration announced plans to refill the SPR after maintenance is completed later this year.
- The EIA expects spot WTI prices to average $73.62 in 2023, vs $79.24 in its previous forecast.
- The EIA increased its 2023 world oil demand growth by 120,000 bpd to 1.56 mbpd.
- OPEC will release its monthly report on Thursday.
- Reuters estimates crude stocks fell by 900,000 million barrels last week.
- An industry survey yesterday afternoon showed crude stocks rose by 3.6 million barrels, according to sources citing the API.
- The EIA will report inventory data at 9:30 CT.
- The US Consumer Price Index was reported at 4.9% y/y vs 5% est.
- As of 8:00 am CST: Brent crude oil down $0.13 to $77.31, US dollar index down $0.258 to 101.347 while the nearby e-mini S&P 500 futures contract is up 32.25 to 4166.00.
Diesel
- Reuters estimates diesel stocks fell by 800,000 barrels last week.
- An industry survey yesterday afternoon showed diesel stocks fell by 3.9 million barrels, according to sources citing the API.
- Russia has begun exporting diesel to Chile to replace lost volumes to the EU due to the embargo.
Gasoline
- Reuters estimates gasoline stocks fell by 1.2 million barrels last week.
- An industry survey yesterday afternoon showed gasoline stocks rose by 399,000 barrels last week, according to sources citing the API.
- The EIA expects retail gasoline prices to average $3.40 this summer.
Propane
- Conway is trading at .6950 while Belvieu is trading at .7000.
- Conway is trading at 40% of crude.
- The US is exporting 62% of production as of 4/28/23.
- OPIS estimates propane stocks rose by 1.3 million barrels last week.
Natural Gas
- Overnight weather runs were unchanged through the two-week forecast.
- Yesterday, US natural gas demand rose to 92.5 Bcf/d.
- The EIA expects natural gas consumed for summer 2023 will average 38 Bcf/d, the second highest on record after last summer's 39 Bcf/d.
Continuous Daily RBOB: The gasoline market has posted a nice rebound over the last several sessions. Summer driving season is fast approaching which should continue to support prices. The April high near $2.90 seems like a leap from where we are today, however, a lower-than-expected CPI print today could further persuade the Fed to pause in June and allow upward momentum to continue.
