Outlook: The energy complex is under pressure this morning with crude and products observing healthy losses. There is a lot of chatter in the market regarding how traders are viewing the recent OPEC+ cuts. Saudi’s energy minister reiterated yesterday their targeting of those shorting the energy market, stating the physical market and futures market aren’t aligning. There is likely some risk-off at play here with US inflation data out tomorrow and a Fed meeting for an interest rate decision on Wednesday. Inflation data is expected to decline from a y/y and m/m perspective, which may help cool some of the macro fears if realized.
Crude
- Saudi Arabia’s energy minister said on Sunday that Saudi and its OPEC+ allies are trying to combat uncertainties and sentiment in the oil market with the futures market and physical market showing different signals.
- Iran has denied reports that it’s in talks with the US over an interim nuclear deal.
- Goldman Sachs lowered its December WTI oil forecast to $81, down from $89 previously.
- Loading’s of the 13 main North Sea oil grades for July is set for the highest since October 2021.
- Last Friday the US announced another SPR purchase of 3.1 million barrels for September.
- Baker Hughes reported US rig counts rose by 1 to 556 last week.
- US inflation data for May will be posted tomorrow morning at 7:30 CT.
- The Fed is expected to leave interest rates unchanged when they meet this week.
- As of 7:50 am CST: Brent crude oil up $0.37 to $77.32, US dollar index down $0.481 to 103.618 while the nearby e-mini S&P 500 futures contract is up 3.25 to 4277.00.
Diesel
- The EPA will announce this week how much biomass-based diesel it should mandate to be mixed into the fuel supply for 2023, 2024, and 2025.
- Last week’s COT report showed managed money traders bought 6,923 and are net long 14,820 contracts.
Gasoline
- Nigeria’s gasoline demand is expected to fall by 20% (60,000bpd) after their President ended a $10 billion fuel subsidy, according to Wood Mackenzie.
- Last week’s COT report showed managed money traders reduced their net long position by 3,344 contracts to net long 53,163.
Propane
- Conway is trading at .5825 while Belvieu is trading at .5975.
- Conway is trading at 35% of crude.
- The US is exporting 58% of production as of 6/2/23.
Natural Gas
- Overnight weather runs removed 9 CDDs through the two-week forecast.
- Yesterday, US natural gas demand fell to 93.4 Bcf/d.
- Baker Hughes reports natural gas rigs fell by 2 last week to 135.
Renewable Diesel: Renewable diesel production is expected to reach 385,000 bpd by 2025, which is over double that of 2022, per EIA data. Federal incentives have supported the swift production growth to push the industry on a greener path. The EPA is expected to decide its blending mandates for 2023, 2024, and 2025 on Wednesday, amid concern that proposed targets lowballed potential production, according to Bloomberg.
