Outlook: The energy complex is under heavy pressure again today which has various product testing downside support targets. The selling is widespread beyond just energies with recession fears gaining weight this week. However, poor manufacturing out of China overnight has further stoked the fire. With high expectations for China to lead demand growth this year, contracting in the Manufacturing industry is not a sign of progress. Additionally, Saudi Aramco cutting prices to Asia is usually an indicator of softening demand while some of that could be attributed to Russian crude snatching market share. It is becoming evident that the weekly data from the EIA, regardless of how positive, will not be enough to start a bullish trend unless it begins to snowball. A shift in the macro environment, a shift in Chinese economic growth, or further cuts from OPEC+ may be necessary for the narrative to change for energies.
Crude
- China’s manufacturing activity contracted more than expected in May, with PMI data down to 48.8 from 49.2 previous and 49.4 est.
- HSBC does not expect OPEC+ to announce further cuts over the weekend.
- Prompt WTI spreads settled at their widest contango YTD yesterday as physical markets hold ample supply.
- Yesterday, the Iraqi cabinet approved a new offshore export pipeline which is expected to move 2 million bpd.
- A Reuters poll of 43 economists suggests WTI will average $79.20 in 2023, down from $82.23 last month.
- Reuters estimates US crude stocks fell by 1.2 million barrels last week.
- Inventory reports will be delayed by one day this week due to the Monday holiday.
- JOLTS job openings will be reported at 9:00 CT, which has garnered more attention due to a resilient labor market amidst economic tightening.
- The API will report its inventory survey at 3:30 CT.
- As of 7:53 am CST: Brent crude oil down $1.72 to $71.82, US dollar index up $0.242 to 104.406 while the nearby e-mini S&P 500 futures contract is down 20.25 to 4194.00.
Diesel
- Reuters estimates diesel stocks rose by 1.1 million barrels last week.
- Corn planting was reported at 92% complete vs 84% average while beans are 83% complete vs 65% average.
- Today is LTD for June ULSD.
Gasoline
- Reuters estimates US gasoline stocks fell by 200,000 barrels last week.
- Gas Buddy reported Memorial Day demand was 1.1% lower than last year.
- Today is LTD for June RBOB.
Propane
- Conway is trading at .5900 while Belvieu is trading at .6000.
- Conway is trading at 35% of crude.
- The US is exporting 52% of production as of 5/19/23.
Natural Gas
- Overnight weather runs added 2 CDDs through the two-week forecast.
- Yesterday, US natural gas demand rose to 87.5 Bcf/d.
- Senator Joe Manchin added a deal to the debt ceiling bill that will accelerate the 303-mile Mountain Valley Virginia Pipeline.
Continuous Daily RBOB: The gasoline market is looking at a breakout lower today, finding support on its 200-day moving average at $2.5437. The macro scene is pressure commodities in general today however poor Memorial Day demand readings are adding fuel to the fire. $2.50 will be a psychological support target if the 200-day is breached.
