Outlook: Energies are looking for a nice rebound this morning after taking a heavy hit yesterday. Headlines have been favorable to start the day allowing gains to extend. China unexpectedly shifting to stimulus mode again took the market by surprise overnight. This move could be viewed as acknowledgment from the country that growth has been at a slower pace than expected, but also that they remain proactive in moving towards their goals. On the opposite of the economic spectrum, US inflation data came in on the low end of estimates with year-over-year may inflation coming in at 4%. Core inflation has remained stickier coming in at 5.3% y/y, down from 5.5% in April. The Fed has said their priority would be core inflation, while Fed fund futures have jumped post-report to 97% of a pause for interest rates. Canadian wildfires are on the rise again and will be something to keep an eye on. Outages peaked near 300,000 bpd a few weeks back but up to 1 million bpd of production remains at risk if conditions worsen.
Crude
- China unexpectedly cut its key short-term interest rates today, providing stimulus for the economy due to lower lending rates.
- OPEC’s output fell by 464,000 bpd to 28.06 mbpd according to their monthly report.
- OPEC sees global oil demand increasing by 2.35 mbpd, nearly unchanged from 2.33 mbpd last month.
- Canadian wildfires are on the rise in Alberta again with 76 active fires and 23 considered out of control.
- According to EIA data, US oil output from top shale regions is expected to rise 9.38 mbpd in July.
- Sour crude prices in the Gulf are trading at the highest premium to WTI in a year following the recent US SPR purchases.
- The 2nd-3rd month WTI spread has flipped to contango this week, signaling ample supply in the market.
- US May CPI came in lower-than-expected y/y at 4.1% vs 4.2% est and 4.9% previous.
- The Fed is expected to leave interest rates unchanged when they meet this week.
- Reuters estimates crude stocks fell by 1.3 million barrels last week.
- As of 7:58 am CST: Brent crude oil up $1.64 to $73.48, US dollar index down $0.523 to 103.131 while the nearby e-mini S&P 500 futures contract is up 21.25 to 4364.00.
Diesel
- Reuters estimates diesel stocks fell by 1.6 million barrels last week.
- The prompt continuous diesel contract has been finding support on its 200-week moving average at $2.3044.
- Offers for 2024 calendar avg price diesel swaps have fallen below $2.30. Please reach out to firm up values or find out more about how this could fit your operation.
Gasoline
- Reuters estimates gasoline stocks fell by 600,000 barrels last week.
- Gasoline cracks rose on a weekly average basis for all major regions, according to FGE.
- The US lead the way with gulf cracks rising $2.70 w/w while cracks in Asia rose $1.30 w/w.
Propane
- Conway is trading at .5400 while Belvieu is trading at .5625.
- Conway is trading at 35% of crude.
- The US is exporting 58% of production as of 6/2/23.
Natural Gas
- Overnight weather runs were unchanged through the two-week forecast.
- Yesterday, US natural gas demand fell to 91.9 Bcf/d.
- A heat wave throughout Europe over the next 10 days could increase power demand for cooling.
Weekly Continuous Diesel: The diesel market has found support on its 200-week moving average at $2.3044. This is likely providing some psychological support at $2.30 to reinforce these levels. The diesel crack has remained strong pushing back over $30 this week, supported by refiners prioritizing gasoline amidst peak summer demand.
