Outlook: The energy complex is moving higher today with crude and products all in the green. The week has seen high volatility but sits near the levels we opened the week at. A pause from the Fed yesterday may provide a light level a comfort to the market short term, however, a hawkish view for the end of the year will be in the back of traders' minds. China continues to show crude processing growth with May up 15.4% y/y. Stimulus efforts could provide an artificial boost with growth levels performing below expectations for the first half of the year. A weaker dollar and heavy purchasing in the Middle East have created a favorable discount for WTI which could put some pressure on the physical market if buying opportunities persist. The overarching trend in energy appears to be sideways until a breakout in either direction occurs.
Crude
- Chinese refiners processed 62 million tons of crude last month, equivalent to 14.66 mbpd. This was 1.9% below April levels and 15.4% above year-ago levels.
- JPMorgan cut their Brent oil forecast from $89 to $81 yesterday.
- UBS expects a supply deficit of 1.5 mbpd in June and more than 2 mbpd in July.
- Heavy trading for Dubai oil has increased premiums over WTI to its highest level since late March, according to Bloomberg data.
- US crude stocks fell by 7.9 million barrels last week.
- Refinery utilization fell by 2.1% to 93.7%, which is 4.3% above the 5-year average.
- The Fed paused interest rate hikes but retain a hawkish view through the end of the year.
- The ECB raised interest rates by 25 bps to 3.5% this morning.
- As of 8:20 am CST: Brent crude oil up $0.90 to $74.10, US dollar index down $0.100 to 102.845 while the nearby e-mini S&P 500 futures contract is down 8.25 to 4366.00.
Diesel
- The EIA reported diesel stocks rose by 2.1 million barrels last week.
- 4-week average diesel demand is up 0.8% above year-ago levels.
- Nymex heating oil open interest rose to its highest level since February 2022.
Gasoline
- The EIA reported gasoline stocks rose by 2.1 million barrels last week.
- 4-week average gasoline demand is up 2.4% above year-ago levels and rose to its highest level since December 2021.
Propane
- Conway is trading at .5575 while Belvieu is trading at .5750.
- Conway is trading at 34% of crude.
- The US is exporting 58% of production as of 6/2/23.
- The EIA reported propane stocks rose by 3.1 million barrels last week.
Natural Gas
- Overnight weather runs removed 2 CDDs the two-week forecast.
- Yesterday, US natural gas demand fell to 93.1 Bcf/d.
- The EIA is expected to report a 95 Bcf injection into storage for last week.
- Dutch TTF prices are up sharply again today following reports that the Netherlands will shut down Europe’s biggest gas field later this year.
Transportation Oil Demand: The transition to electrification has slotted peak oil demand for 2027-2029, according to BloombergNEF. With demand expected to drop 53% by 2050 in the Economic transition scenario, that still leaves close to 20 mbpd of demand on the table.
