Outlook: The energy market is continuing its rebound today with crude and products all up over 2% to kick things off. Shorts in the market may be cashing in prior to the weekend which could be providing support. The Senate approved the debt ceiling bill yesterday which may have reassured investors that a default will be avoided. Equities have responded higher despite a higher dollar this morning. Economic reports have seen conflicting correlations this week with US manufacturing showing contracting for the seventh week in a row, while Nonfarm payroll data showed larger-than-expected job additions. Fed fund futures still lean towards an interest rate pause in June, but this can shift quickly with the right conditions. The OPEC+ meeting will be the focus heading into the weekend with a production decision expected to be announced on Sunday. The consensus remains no adjustment to be made, but a surprise could create significant volatility for energies at the open on Sunday evening.
Crude
- OPEC+ will meet on June 4th to announce whether there will be any adjustment to current production cuts.
- Four OPEC+ sources have said the group is unlikely to deepen output cuts.
- The Senate vote passed to raise the debt ceiling and avoid default. The bill now goes to President Biden to sign before its ratified.
- US ISM Manufacturing PMI fell to 46.9 last month, marking the seventh consecutive month of contraction.
- US Nonfarm Payrolls came in at 339,000 vs 190,000 expected for May. The report shows the number of new jobs created in all non-agricultural businesses.
- Fed fund futures are projecting a 35% chance of an interest rate hike in June.
- Reuters estimates US crude stocks fell by 1.4 million barrels last week.
- The EIA reported US crude stocks rose by 4.4 million barrels last week.
- US crude production fell by 100,000 bpd to 12.2 million bpd.
- US net crude imports rose 1 million bpd last week.
- As of 8:13 am CST: Brent crude oil up $1.59 to $75.87, US dollar index up $0.022 to 103.582 while the nearby e-mini S&P 500 futures contract is up 24.25 to 4252.00.
Diesel
- The EIA reported US diesel stocks rose by 985,000 barrels last week.
- Diesel demand over the past four weeks averaged 3.9 mbpd, up 1.2% from the same period last year.
Gasoline
- The EIA reported US gasoline stocks fell by 207,000 barrels last week.
- Gasoline demand over the past four weeks averaged 9.2 mbpd, up 3.5% from the same period last year.
Propane
- Conway is trading at .5725 while Belvieu is trading at .5800.
- Conway is trading at 35% of crude.
- The US is exporting 53% of production as of 5/19/23.
- The EIA reported a larger-than-expected build of 3.9 million barrels for propane stocks last week.
- Propane stocks are 42% higher than 2022 levels for this time period.
Natural Gas
- Overnight weather runs removed 12 CDDs through the two-week forecast.
- Yesterday, US natural gas demand rose to 94.1 Bcf/d.
- The EIA reported a natural gas injection of 110 Bcf
- The 5-year average injection is 101 Bcf.
Continuous Daily ULSD: The prompt diesel contract opened below its lower Bollinger Band yesterday before rebounding over 12 cents as it sits today. The upper Bollinger at $2.44 may be an upside target if market strength spills over into next week. Gasoline production is taking priority over diesel amidst peak driving season which could provide favorable fundamentals for the move.
