Outlook: The energy complex is edging lower this morning with crude and products all down around 1%. The market appears to be more concerned about a possible standoff regarding the debt ceiling than a few of the minor bullish drivers in the headlines this morning. A default by the US could ensure further economic instability and increase the odds of a recession, causing demand destruction. Inflationary data this morning from the PPI report followed suit with the CPI coming in below market expectations. This softened up the dollar a little but it remains up around 200 points today which could be pressuring commodities. OPEC released its monthly report for April today which appears to lean bullish. OPEC reports its production fell by 191,000 bpd to 28.6 mbpd and made a slight upward revision to its global demand growth forecast which sits at 2.33mbpd. Worth noting OPEC’s demand forecast is substantially higher than the EIA’s released earlier this week at 1.56 mbpd.
Crude
- Energy Secretary Janet Yellen warned that the US intends to crack down on Russia’s tactics to evade sanctions.
- China issued its second batch of fuel export quotas to its largest refiners totaling 9 million tons of gasoline, diesel, and jet fuel. YTD including the new quota totals 27.99 million tons.
- OPEC made a minor revision higher for its world oil demand growth to 2.33 mbpd, up from 2.32 mbpd the month prior.
- OPEC increased China’s demand forecast by 40,000 bpd to 800,000 bpd for 2023.
- OPEC’s oil output fell by 191,000 bpd in April to 28.6 mbpd
- The EIA reported a 2.9 million barrel build in crude stocks for last week.
- US crude stocks sit 5.7 million barrels below the 5-year average.
- US crude net imports rose by 1.1 million barrels last week.
- Crude exports to Europe totaled 1.7 mbpd in March, and 1.6 mbpd in April in the absence of Russian oil.
- The US Consumer Price Index was reported at 4.9% y/y vs 5% est.
- The BOE increased interest rates today by 25 bps to 4.5%.
- As of 8:00 am CST: Brent crude oil down $0.68 to $75.73, US dollar index up $0.227 to 101.704 while the nearby e-mini S&P 500 futures contract is down 8.25 to 4143.00.
Diesel
- The EIA reported diesel stocks fell by 4.1 million barrels last week.
- US diesel demand rose 4.2% last week to 4.0 mbpd.
- Diesel stocks sit 20.3 million barrels below the 5-year average.
Gasoline
- The EIA reported gasoline stocks fell by 3.1 million barrels last week.
- US gasoline demand rose 7.9% w/w to 9.3 mbpd.
- Gasoline stocks sit 16.1 million barrels below the 5-year average.
Propane
- Conway is trading at .68250 while Belvieu is trading at .6850.
- Conway is trading at 39% of crude.
- The US is exporting 66% of production as of 5/5/23.
- The EIA reported propane stocks rose by 3.1 million barrels last week.
- US propane stocks sit 14 million barrels above the 5-year average.
Natural Gas
- Overnight weather runs added 1.5 CDDs through the two-week forecast.
- Yesterday, US natural gas demand rose to 92.5 Bcf/d.
- The EIA is expected to report a 73 Bcf injection into storage for last week.
- The 5-year average injection is 87 Bcf.
WTI Prompt Spread: The weakness in crude over the last few weeks has brought the prompt spread closer to contango once again. An unexpected build in crude stocks last week supported further weakness and is looking to test support today. A market in contango can signal demand weakness or supply excess and increase the incentive to store product.
