Outlook: The energy markets will look to extend their streak of gains with another convincing move higher this week. Crude is up over 18% in the last six weeks and shrugged off a weaker start yesterday. Global fundamentals continue to point towards tightening stocks despite economic tightening in major countries. This is largely supported by the production cuts maintained by OPEC+ which should continue through the rest of the year. The labor market reports this morning were mixed with Nonfarm payroll data coming in under estimates while unemployment exceeded estimates. Labor markets continue to be resilient despite elevated interest rates. A looming threat remains how inflation will handle the recent rally in energy prices, which could complicate the Fed’s path moving forward.
- OPEC+ JMMC recommended no change to the current output policy.
- Saudi Arabia will extend its voluntary 1 mbpd production cut through September.
- Russia will cut its oil exports by 300,000 bpd next month, down from 500,000 bpd in August.
- Russia’s Novorossiysk export hub closed for several hours earlier today after Ukrainian drone attacks hit a naval vessel.
- Russia expects global oil demand to grow by 2.4 mbpd in 2023.
- WTI has risen over 18% in the last six weeks.
- Nonfarm payrolls for July were reported at 187k vs 200k est.
- As of 8:18 am CST: Brent crude oil up $0.50 to $85.64, US dollar index down $0.543 to 101.999 while the nearby e-mini S&P 500 futures contract is up 18.25 to 4540.00.
- Both unplanned disruptions and planned turnaround announcements continue to support refined prices and margins.
- The prompt diesel crack could make a run for $50 next week if strength continues, which would be the highest level since January.
- AAA reports the national average retail gas price at $3.831, up 10 cents from last week.
- Hurricane season remains a threat to provoke a further rally in refined products as we head into fall.
- Conway is trading at .7300 while Belvieu is trading at .7450.
- Conway is trading at 38% of crude.
- The US is exporting 51% of production as of 7/28/23.
- Overnight weather runs were unchanged for the two-week forecast.
- Yesterday, US natural gas demand fell to 99.8 Bcf/d.
- US natural gas production is expected to average 102 Bcf/d over the next two weeks.
- The EIA reported a 14 bcf injection into storage for last week.
Continuous Daily WTI: The crude market saw a significant reversal yesterday following announcements from both Saudi and Russia to extend production cuts. Further support came today from the OPEC+ panel keeping the group's total output cuts steady. $83.53 remains the upside target, marking the April high which rejected the 200-day MA.