Outlook: The energy complex is mixed this morning despite reports of Russian oil tankers being targeted by Ukraine. The lack of serious damage may be muting market response, but escalation could pose a greater risk moving forward. Energy markets have approached areas of resistance which may take more convincing to push through to fresh highs. A tightening marketplace should continue to control the trend if the economy continues to cooperate. Baker Hughes reported US oil rigs fell once again with rigs sitting 105 below year-ago levels. The US will report inflation data this week on Thursday and indications are that inflation will increase on a y/y basis. Sticky inflation could create complications for the Fed, and a more aggressive track would likely further dampen demand.
Crude
- Ukraine attacked a Russian oil tanker over the weekend, posing a threat to future oil exports.
- Saudi Aramco raised its oil prices to Asian customers in September by 60 cents.
- Russia’s primary crude processing averaged 5.64 mbpd during the first two days of the month.
- Poland has halted oil flows through the Druzhba pipeline after a leak was detected on Saturday.
- Global crude in floating storage fell by 4.6% last week.
- Last week’s COT report showed WTI outright longs were highest since July 2022.
- Baker Hughes reported US oil rigs fell by 4 last week to 525.
- China will report July import/export data tonight.
- US July inflation will be reported on Thursday
- As of 8:53 am CST: Brent crude oil down $0.57 to $85.67, US dollar index up $0.015 to 102.032 while the nearby e-mini S&P 500 futures contract is up 23.25 to 4522.00.
Diesel
- The Indian government has reduced taxes on fuel to alleviate pressure on consumers and bolster demand.
- Last week’s COT report showed heating oil managed money traders net bought 3,640 contracts and are net long 28,432 contracts.
Gasoline
- Exxon’s Baton Rouge 120k bpd FCC unit began to restart over the weekend after being shut down on July 21st.
- Last week’s COT report showed Nymex gasoline outright longs rose to the highest since March 2021.
Propane
- Conway is trading at .7400 while Belvieu is trading at .7575.
- Conway is trading at 38% of crude.
- The US is exporting 51% of production as of 7/28/23.
Natural Gas
- Overnight weather runs were unchanged for the two-week forecast.
- Friday, US natural gas demand rose to 102.5 Bcf/d.
- US natural gas production is expected to average 102 Bcf/d over the next two weeks.
- Baker Hughes reported US natural gas rigs were unchanged at 128 last week.
- Victoria, Australia passed a vote to ban natural gas to new homes starting in 2024.
Continuous Weekly HO: The prompt weekly diesel contract is finding resistance on its 100-week moving average (purple line.) A breach of this level will increase the confidence for a move toward the 2023 high at $2.58.
