Outlook: The energy complex is idle to start the morning but not for lack of market drivers. Market reaction to the US announcing a purchase of 3 million barrels appears to be all but extinguished already. An underwhelming volume for the purchase didn’t allow buying to develop. The US can inject around 500,000-700,000 bpd into the SPR so realistically this purchase could be finished within a week. The IEA released its monthly report today which leaned slightly bullish. The primary takeaway was a revision higher in global demand to 102 mbpd for 2023 while leaving supply unchanged at 101.1 mbpd. On the bearish front, Chinese economic data released overnight showed growth momentum slowing. Both retail sales and industrial output undershot estimates but overall maintained growth. With China expected to lead global demand growth this year, signs of slowing can quickly create a bearish tone for the market.
Crude
- Yesterday the US announced a plan to buy 3 million barrels to refill the SPR with bids due by May 31st.
- The IEA revised its global oil demand forecast higher by 100,000 bpd to 102 mbpd for 2023 while leaving its supply forecast unchanged at 101.1 mbpd.
- The IEA expects the global oil market to return to a deficit averaging 2.1 mbpd for the second half of 2023.
- China’s industrial output and retail sales growth came in below estimates for April, hinting toward slowing growth to start Q2.
- China’s refinery intake is expected to rise by 1.5% this month, according to Wood Mackenzie.
- Kpler data shows Saudi crude exports are likely to average 6.48 mbpd amidst production cuts. April exports were 7.58 mbpd.
- The EIA’s Drilling Productivity Report forecast US crude output to increase by 41,000 bpd from May to June.
- Reuters estimates crude stocks fell by 1.3 million barrels last week.
- The US SPR fell by 2.4 million barrels last week.
- As of 7:50 am CST: Brent crude oil up $0.19 to $74.41, US dollar index down $0.053 to 102.381 while the nearby e-mini S&P 500 futures contract is down 12.25 to 4137.00.
Diesel
- Reuters estimates diesel stocks rose by 200,000 barrels last week.
- Air travel over Memorial Day weekend is set to exceed pre-pandemic by 5.4% according to Bloomberg.
- The Nymex diesel crack rose to its highest level in a month with a high of $28.98 today.
Gasoline
- Reuters estimates gasoline stocks fell by 1 million barrels last week.
- Roughly 42.3 million Americans will travel 50 or more miles this Memorial Day weekend, a 7% increase from 2022, according to AAA and S&P Global.
- The Nymex gasoline crack rose to its highest level in nearly a month closing at $32.71 yesterday.
Propane
- Conway is trading at .6400 while Belvieu is trading at .6500.
- Conway is trading at 38% of crude.
- The US is exporting 66% of production as of 5/5/23.
- US corn planting is 65% complete and ahead of the 5-year average of 59%.
Natural Gas
- Overnight weather runs added 5 CDDs through the two-week forecast.
- Yesterday, US natural gas demand rose to 91.5 Bcf/d.
- The EIA’s Drilling Productivity Report forecast natural gas production will increase by 256 mmcf/d between May23 and Jun23. The increase is the smallest since November 2021.
3-2-1 Crack Spread: Crack spreads have been on the rebound since bottoming out to begin the month. The 321 crack is at its highest level in nearly a month ahead of peak demand season. Facts Global Energy said they don’t expect a slowdown in global run rates until after summer with cracks on the rebound.
