Outlook: The energy market is opening strong this morning with crude and products all observing gains. Despite the US dollar pushing to multi-week highs and a shift towards a possible rate hike in June, energies have maintained upward momentum. Fed fund futures now suggest a 40% chance of a 25 basis point hike when the Fed meets again in June, up from 20% earlier this week. Debt ceiling discussions are ongoing and could provide volatility into the weekend depending on progress made. The market may also be pricing in worsening wildfire conditions ahead of the weekend in Canada. Hot and dry weather in the forecast could bring additional disruption to crude supplies and tighten up the WCS-WTI spread.
Crude
- The UK announced fresh sanctions against Russia’s major energy and arms shipping companies today.
- The G7 is set to announce additional sanctions against Russia over the weekend following their summit in Japan.
- Wildfires in Canada rose by 1 to 92 yesterday. With hot and dry weather forecasted, conditions are expected to worsen heading into the weekend.
- South Korea and Taiwan purchased 14 million barrels of US crude for August delivery.
- WTI’s prompt spread is sliding deeper into contango, trading below -15 cents this morning.
- June WTI is set to expire on Monday.
- A weaker US dollar is providing support to the complex today, while the market still awaits a debt ceiling resolution.
- Baker Hughes will report its rig count at 12:00 CT.
- As of 8:00 am CST: Brent crude oil up $1.40 to $77.26, US dollar index down $0.379 to 103.206 while the nearby e-mini S&P 500 futures contract is up 13.25 to 4225.00.
Diesel
- AAA reports the national average diesel price at $4.008, down 2.5 cents from a week ago.
- The prompt diesel crack has risen around $2.50 this week, trading around $29 today.
Gasoline
- AAA reports the national average retail gas price at $3.541, unchanged from a week ago.
- The prompt gasoline crack has risen nearly $4 this week, trading near $36 today.
Propane
- Conway is trading at .6425 while Belvieu is trading at .6450.
- Conway is trading at 38% of crude.
- The US is exporting 65% of production as of 5/12/23.
Natural Gas
- Overnight weather runs removed 2 CDDs through the two-week forecast.
- Yesterday, US natural gas demand fell to 91.9 Bcf/d.
- The EIA reported a smaller-than-expected build of 99 Bcf yesterday.
- In a summer reliability assessment yesterday, FERC expects US energy systems to withstand 2023 summer risks due to new generating capacity and lower gas prices.
Continuous Daily RBOB: The gasoline market is on track for a strong week busting through various technical resistance levels. Elevated demand has kept the market strong as we approach peak driving season. Today RBOB will look to close above its 50-day moving average at $2.6028 as an indicator for further strength into next week.
