Outlook: The energy complex is edging lower this morning with crude and products all in the red. We could be seeing some profit-taking to start the week following the rally which tipped crude overbought from a Bollinger perspective on Friday. Products remain short of overbought but both gas and diesel have breached their 100-day moving average following the move. With US inflation being reported mid-week, the market may lean risk off if no significant bullish drivers develop. Inflation is expected to fall significantly year-over-year from 4% to 3.1%, which does leave room for potential underperformance. A positive fundamental development this week is reporting that Saudi Arabia increased oil prices to various customers. Considering the additional OPEC cuts, a tightening marketplace should increase premiums if a supply deficit is developing. It could be a critical week for energy prices as we sit at the upper end of the recent trade range.
Crude
- Russia’s crude processing rose to its highest level in 12 weeks for the first week of July at 5.65 mbpd.
- The US announced on Friday it intends to buy 6 million barrels for the SPR to refill in October and November.
- Saudi Arabia issued a price increase to European and Mediterranean oil customers, which can be viewed as a response to a tightening marketplace.
- Petroleos Mexicanos said it lost around 700,000 barrels of production capacity, or around a third of its daily output, after a platform explosion on Friday.
- Operations of all oil pumping states in Kazakhstan have been resumed after ongoing blackouts last week.
- Baker Hughes reported US oil rigs fell by 5 to 540 last week.
- China’s Producer Price Index fell for a ninth consecutive month in June, down 5.4% from last year, according to the National Bureau of Statistics.
- The prompt continuous WTI contract closed above its upper Bollinger Band on Friday, which can be an overbought indicator.
- US CPI will be reported on Wednesday.
- As of 8:00 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 prompt continuous diesel contract closed above its 100-day moving average on Friday.
- Last week’s COT report showed HO-managed money traders added 2,164 contracts and are net long 18,984 contracts.
Gasoline
- The prompt continuous gasoline contract closed above its 100-day moving average on Friday.
- Last week’s COT report showed RBOB-managed money traders reduced their net length by 2,857 contracts and are net long 45,742 contracts.
Propane
- Conway is trading at .5600 while Belvieu is trading at .5925.
- Conway is trading at 32% of crude.
- The US is exporting 48% of production as of 6/30/23.
- Winter propane strips for 2024-2025 were priced around 73 cents last week. Please reach out for updated values.
Natural Gas
- Overnight weather runs added 5 CDDs to the two-week forecast.
- Yesterday, US natural gas demand fell to 98.2 Bcf/d.
- On Friday, the EIA reported natural gas inventories rose by 72 Bcf last week.
- Baker Hughes reported US gas rigs rose by 11 to 135 last week.
Continuous Daily ULSD: The prompt diesel contract closed above its 100-day moving average on Friday for the first time since late January. While this can sometimes be viewed as a bullish move, we may be seeing some profit taking after the rally last week.
