Outlook: The energy complex is finding strength today and overall is on pace for a positive week across the board. Diesel is the strong leg of the complex today up over 3 cents while crude and gas maintain marginal gains. While the trend this week has been higher, the overall trend still appears rangebound. Critical support and resistance levels have yet to be broken to signal a breakout in either direction thus far. The fundamental and macroeconomic diversion is ongoing with supplies expected to tighten this year despite elevated interest rates and the threat of recessionary demand destruction. The overwhelming consensus is that the Fed will raise interest rates again this month and next week’s inflation report may solidify just that. Another economic fracture, similar to previous banking events, may be necessary for markets to acquire fresh lows. Meanwhile, upside momentum appears to be slow and steady as demand is closely monitored.
Crude
- The CME FedWatch projects a 92.5% chance the Fed will raise interest rates by 25 bps this month.
- Nonfarm payrolls for June came in at 209k vs 225k est. which may cool rate hike expectations.
- The Sep-Oct WTI spread has risen nearly 30 cents since its low at the end of June and now trades at 23 cents of backwardation.
- US crude production rose by 200,000 bpd to 12.4 mbpd last week.
- US net crude imports rose by 1.9 mbpd last week.
- The EIA reported US crude stocks fell by 3 million barrels last week.
- Next week’s EIA report should show the last drawdown of the 26 mb release. Refills will begin in August.
- As of 8:50 am CST: Brent crude oil up $0.20 to $76.72, US dollar index down $0.422 to 102.744 while the nearby e-mini S&P 500 futures contract is up 1.25 to 4448.00.
Diesel
- The EIA reported diesel stocks fell by 1 million barrels last week.
- Diesel stocks are 16% below five-year average levels for this time period.
- US diesel demand rose by 497 kbpd (15%) last week to 3.8 mbpd.
Gasoline
- The EIA reported gasoline stocks fell by 2.5 million barrels last week.
- Gasoline stocks are 7% below five-year average levels for this time period.
- US gasoline demand rose by 293 kbpd (3.1%) last week to 9.6 mbpd.
Propane
- Conway is trading at .5350 while Belvieu is trading at .5575.
- Conway is trading at 32% of crude.
- The US is exporting 48% of production as of 6/30/23.
- The EIA reported US propane stocks rose by 1.5 million barrels last week.
Natural Gas
- Overnight weather runs added 4 CDDs to the two-week forecast.
- Yesterday, US natural gas demand fell to 98.9 Bcf/d.
- The EIA is expected to report a 65 Bcf injection
Continuous Daily ULSD: The diesel complex is on track for a strong week and continues to work its way to towards its 100-day moving average. $2.50 has acted as resistance this week but a close above that today could pave the path towards $2.5485.
