Outlook: Energies are working higher after a slow start to the morning. The tug of war between economic instability and supply deficits has found some middle-ground this week but a green day today will allow the complex to sneak out a weekly gain. The US continues to reiterate that they will refill the SPR at some point this year, stating purchases will come after current releases and maintenance ends in June. The quantity that will be purchased remains unclear but will be key for the scale of price reaction. Prices down the crude curve remain in the buy zone the US stated between $67-$72. OPEC is scheduled to meet in early June, and if no purchase is announced by then, the group may be persuaded to deepen current cuts. We expect volatility in the marketplace to persist as these market drivers unfold over the next few weeks.
Crude
- US Energy Secretary Jennifer Granholm said on Thursday that they intend to begin buying oil to refill the SPR once the mandated release ends in June.
- Today, Janet Yellen said the US faces financial and economic catastrophe if Congress fails to raise the debt ceiling.
- Vortexa sees US crude exports in May declining by 18% to 3.6 mbpd, as China dials back heavy purchasing.
- According to OPEC, Russia crude output fell 300,000 bpd to 9.7 mbpd in March.
- Venezuela’s crude production hit a 3-year high in April at 724,000 bpd, according to OPEC data.
- Iraq will resume oil exports via the Ceyhan terminal on Saturday. 465,000 bpd of oil flows have been halted since March 25th.
- Baker Hughes will report its rig count at 12:00 CT.
- Michigan Consumer Sentiment will be reported at 9:00 CT.
- As of 8:27 am CST: Brent crude oil up $0.64 to $75.62, US dollar index up $0.159 to 102.217 while the nearby e-mini S&P 500 futures contract is up 12.25 to 4156.00.
Diesel
- US diesel exports to Europe have tripled this month at 463,000 bpd compared to April.
- Higher US diesel exports to Europe are offsetting a drop in exports to Brazil, which is snatching up cheaper Russian product.
Gasoline
- AAA reports the national average gas price at $3.542, down from $3.561 a week ago.
- Pump prices last year at this time averaged $4.418, and the drastic drop in prices could be stimulating demand.
Propane
- Conway is trading at .6700 while Belvieu is trading at .6725.
- Conway is trading at 40% of crude.
- The US is exporting 66% of production as of 5/5/23.
- Crude will continue to drive propane prices with propane’s value to crude finding support at 40%.
Natural Gas
- Overnight weather runs were unchanged through the two-week forecast.
- Yesterday, US natural gas demand fell to 91.5 Bcf/d.
- The EIA reported a 78 Bcf injection yesterday.
- The 5-year average injection is 87 Bcf, and inventories sit at 332 Bcf above the 5-year average.
Continuous Daily WTI: The prompt crude contract is settling in near even on the week but has traded in nearly a $4 range. Key market drivers may be finding balance in the current environment but that likely won’t last long. Another bearish financial event could quickly turn crude back to the $60s while another OPEC cut or SPR rebuy by the US could push the market towards resistance in the mid $70s.
