Outlook: The energy market remains on track for its most impressive rally this year. A shift in market focus towards global fundamentals has allowed the market to rally to start the second half of the year. This shouldn’t surprise the trade much as 2H supply deficits were widely anticipated this year amidst production cuts and growing demand. The economic view has been the catalyst for this shift in focus with indications of a soft landing providing comfort to the market. Interest rates remain high which will present ongoing risk, however the CME Fedwatch tool expects the Fed to pause rate hikes at their next meeting in September. If interest rates begin to cause instability again, similar to what we saw in the banking industry a few months back, a significant correction could be in store. Today's trade will turn to the EIA inventory data at 9:30. The API has expectations for the largest crude draw since 1982.
Crude
- The Biden Administration has delayed SPR fills for the second time this year after rejecting January offers, citing high oil prices.
- OPEC+ production fell by 900,000 bpd in July to 27.79 mbpd.
- Fitch downgraded the US Sovereign rating to AA+ from AAA due to expected fiscal deterioration over the next three years.
- US ISM manufacturing PMI index rose less than expected at 46.4 vs 46.9 est.
- Reuters estimates crude stocks fell by 1.4 million barrels last week.
- The API estimates crude stocks fell by 15 million barrels last week.
- The EIA will report inventories at 9:30 CT.
- As of 8:25 am CST: Brent crude oil up $0.12 to $85.03, US dollar index up $0.146 to 102.449 while the nearby e-mini S&P 500 futures contract is down 31.25 to 4570.00.
Diesel
- The prompt diesel contract remains overbought with a 14-day RSI value of 83.
- Reuters estimates diesel stocks rose by 100,000 barrels last week.
- The API estimates diesel stocks fell by 500,000 barrels last week.
Gasoline
- Reuters estimates gasoline stocks fell by 1.3 million barrels last week.
- The API estimates gasoline stocks fell by 1.7 million barrels last week.
Propane
- Conway is trading at .7100 while Belvieu is trading at .7250.
- Conway is trading at 36% of crude.
- The US is exporting 64% of production as of 7/21/23.
Natural Gas
- Overnight weather runs were unchanged for the two-week forecast.
- Yesterday, US natural gas demand fell to 99.9 Bcf/d.
- Russia’s LNG exports fell to the lowest level in nearly two years in July.
Continuous Daily HO: The diesel complex has remained strong throughout July and with the September contract moving to prompt, maintains a premium over RBOB. Diesel continues to trend on in upper Bollinger and remains overbought from a 14-day RSI metric. A value over 70 is an overbought indication and the contract currently trades well above that.
