Outlook: The energy complex is sliding lower today after another compelling move higher yesterday. The energy market appeared to be unphased by larger than expected build in crude accompanied by a significant uptick in crude production. The EIA recently revised its 2023 production projection higher to 12.8 mbpd which seemed aggressive considering weekly data has shown considerable time below 12.5 mbpd. This rebounded clearly closed that gap. Positive demand was the focus of the report with a strong rebound in gas demand as well as petroleum demand in general. Without demand destruction, the market appears poised to keep the bullish run intact. US inflation rose y/y in July but came in under expectations. Month-over-month inflation remained steady at 0.2%.
Crude
- OPEC data suggests a 2 million barrel global supply deficit this quarter amidst cuts.
- OPEC’s oil output fell by 836,000 bpd to 27.31 mbpd in July .
- Canada’s Irving Oil is planning a 7-week maintenance at the Saint John refinery in September. The refinery processes 320,000 bpd.
- The backwardation in the prompt crude contracts has increased by over 24 cents so far in August.
- The EIA reported US crude stocks rose by 5.8 million barrels last week.
- US crude production rose by 400,000 bpd to 12.6 mbpd last week.
- US crude exports fell by 2.9 mbpd or 55% last week to 2.3 mbpd.
- US CPI came in y/y at 3.2% vs 3.3% est. M/m remained flat at .2%
- As of 7:30 am CST: Brent crude oil down $0.22 to $87.31, US dollar index down $0.368 to 102.122 while the nearby e-mini S&P 500 futures contract is up 32.25 to 4516.00.
Diesel
- The EIA reported diesel stocks fell by 1.7 million barrels.
- US diesel stocks now sit 23.1 million barrels below 5-year average levels.
- Refinery utilization continues to run hot amidst elevated crack spreads at 93.8%
Gasoline
- The EIA reported gasoline stocks fell by 2.6 million barrels last week.
- Gasoline demand rebounded w/w by 464,000 bpd to 9.3 mbpd.
- Traffic in China rose 2.1% last week and has reached 110.3% of January 2021 levels.
Propane
- Conway is trading at .7250 while Belvieu is trading at .7350.
- Conway is trading at 38% of crude.
- The US is exporting 67% of production as of 8/4/23.
- The EIA reported US propane stocks rose by 1.3 million barrels last week.
- US propane stocks sit 17.7 million barrels above 5-year seasonal average levels.
Natural Gas
- Overnight weather runs removed 2 HDDs to the two-week forecast.
- Yesterday, US natural gas demand fell to 101.2 Bcf/d.
- The March-April spread may present a bull-spread opportunity. Consider buying this spread under 30c or in a breakout move above 37.5 cents.
Continuous Daily NG: Natural gas has joined the party with a bullish run of its own this week. The market has been pressured by record-breaking power burn in Texas over the last several weeks which looks to continue through the end of August. Additionally, the threat of LNG strikes in Australia could be a supporting driver, despite US LNG exports being maxed out.
