Outlook: The energy complex is mixed to start the week with the headline influence in neutral. On the bullish front, the G7 expects to tighten sanctions against Russian energy later this week. Russian flows have continued to increase despite pledged production cuts. Iraqi oil flows have failed to resume once again after chatter that exports were to resume on Saturday. Lastly, wildfires in Canada are ongoing which knocked out over 200,000 bpd of oil production last week. On the bearish front, global crude in floating storage saw a healthy increase last week, increasing to 86.69 million barrels. China is also expected to ramp up exports again with a fresh round of quotas issued to key refiners. Diesel and jet fuel are expected to be prioritized and we may see downward pressure on our market because of it. For the macro front, debt ceiling negotiations look to be progressing which should provide support. Economic influences still appear to be the key driver for the overall trend of the energy market.
Crude
- Reuters is reporting the G7 plans to tighten sanctions on Russian energy at their summit in Japan this week. The meeting will be held on the 19th-21st.
- Northern Iraqi oil flows to Turkey are still halted, despite statements saying flows would resume Saturday.
- Russian oil flows rose for the 4th time in 5 weeks last week and are up 10% from the first week of April.
- Russia’s oil export duty for June is set to rise 12.5% to $16.20/ton which could slow down export growth.
- Wildfire counts rose in Canada over the weekend with 87 active fires and 24 considered out of control.
- Global crude in floating storage rose 9% last week to 86.69mb.
- Last week’s COT report showed managed money traders added 14,878 contracts and are net long 171,925 contracts.
- Baker Hughes reported US oil rigs fell by 2 to 586 last week.
- As of 7:55 am CST: Brent crude oil up $0.42 to $74.57, US dollar index down $0.248 to 102.432 while the nearby e-mini S&P 500 futures contract is up 8.25 to 4146.00.
Diesel
- On Friday China issued its top refineries with 12 million tons of fuel export quotas, with the bulk allocated towards diesel.
- Last week’s COT report showed managed money traders added 2,492 long contracts and are net short 263 contracts.
Gasoline
- Month to date, traffic congestion in China’s 15 key cities is 7.5% higher than the same month last year but 11.4% below May 2021.
- Last week’s COT report showed managed money traders decreased their net length by 8,587 contracts and are net long 39,333.
Propane
- Conway is trading at .6525 while Belvieu is trading at .6625.
- Conway is trading at 39% 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 added 3 CDDs through the two-week forecast.
- Friday, US natural gas demand fell to 90.1 Bcf/d.
- Baker Hughes reported US natural gas rigs fell by 16 last week, marking the sharpest pullback since 2016.
- Three major LNG projects are expected to come online quicker than expected next year. LNG feedgas demand will average 13.4 Bcf/d in 2023 and 13.6 Bcf/d in 2024.
Russian Oil Exports: Russian oil flows are up 10% since the first week of April, showing no signs of slowing despite a production cut. Flows to China and India have also hit a fresh peak as they continue to snatch up discounted oil. Four-week average exports were up 80,000 bpd to 3.72 bpd according to Bloomberg data.
