Outlook: Energies are mixed this morning with crude trading lower while products hold marginal gains. There may be a slight degree of risk off ahead of the Fed meeting today. The Fed is widely expected to increase rates by 25 bps today alongside dovish rhetoric pointing towards a pause for the next meeting. Any surprises such as a more hawkish than expected stance moving forward could put pressure on energies. Inventory stats will be released ahead of the Fed meeting with industries estimates mixed. Further tightening in crude or product stocks may be a bullish influence for prices today, especially if accompanied by an increase in weekly domestic demand. Crack spreads continue to soar with both gas and diesel cracks surpassing $40 this week. Look for today’s drivers to determine the trend for the rest of the week.
- Russian crude exports are expected to rebound in September as cuts are unwound.
- The Fed is expected to announce a 25 basis point hike to interest rates today at 12:00 CT.
- The CME Fedwatch tool is pricing in a 98.9% chance of a 25 basis point hike today.
- Backwardation in the prompt crude spread steepened to its widest levels since May.
- Reuters estimates crude stocks fell by 2.3 million barrels last week.
- An industry survey yesterday afternoon showed crude stocks rose by 1.1 million barrels last week, according to sources citing the API.
- The EIA will release its inventory report at 9:30 CT.
- As of 8:10 am CST: Brent crude oil down $0.83 to $82.81, US dollar index down $0.149 to 101.200 while the nearby e-mini S&P 500 futures contract is down 10.25 to 4585.00.
- Reuters estimates diesel stocks fell by 300,000 barrels last week.
- An industry survey yesterday afternoon showed diesel stocks rose by 1.6 million barrels last week, according to sources citing the API.
- Reuters estimates gasoline stocks fell by 1.7 million barrels last week.
- An industry survey yesterday afternoon showed gasoline stocks fell by 1 million barrels last week, according to sources citing the API.
- Conway is trading at .6350 while Belvieu is trading at .6650.
- Conway is trading at 33% of crude.
- The US is exporting 62% of production as of 7/14/23.
- Overnight weather runs were unchanged for the two-week forecast.
- Yesterday, US natural gas demand increased to 103.5 Bcf/d.
Continuous Daily WTI Spread: The prompt crude spread has moved sharply higher with the expiration of the August contract. The market had preached about the tightening expected for the second half of the year, and this spread reflects evidence of that underway. Sharper backwardation can indicate tighter supplies and more demand nearby than in the deferred. It also disincentives keeping products in storage.