Outlook: The energy complex is mixed to kick things off this week with crude higher while products lag lower. As expected, OPEC announced a continuation of their current production cuts through May early yesterday. The market saw a brief reaction at the open Sunday night but the move overall was muted. Crude slipped in the red early this morning in what looked to be buying the rumor and selling the fact, however, a real concern of tightening supplies globally may be providing support. While domestic crude demand is finding relief from low refinery utilization, exports have been picking up the slack. Both Brent and WTI benchmarks sit comfortably in backwardation reflecting the tighter environment. Natural gas is showing the most conviction today trading up over 10 cents. Producers are beginning to curtail production due to the extended time at lower prices and ample inventories.
Crude
- Yesterday, OPEC announced it will extend its current production cuts of 2.2 mbpd through Q2 2024. (Reuters)
- Russia announced it will cut output by an additional 471,000 bpd which closely correlates with the drop in the country’s refinery runs. (Reuters)
- China’s crude oil processing hit a record 14.8 mbpd in 2023, according to their National Bureau of Statistics.
- China will release monthly import/export data later this week.
- Global crude in floating storage fell by 2.4% last week to 68.6 million barrels. (BBG)
- Money managers last week boosted net-long positions in WTI to the highest level since October.
- Baker Hughes reported oil rigs rose by 3 to 506 last week. US oil rigs are down 16% y/y.
- As of 8:35 am CST: Brent crude oil up $0.32 to $83.87, US dollar index up $0.001 to 103.862 while the nearby e-mini S&P 500 futures contract is down 8.25 to 5137.00.
Diesel
- US Refinery activity remains at its lowest level since 2011.
- Nearby diesel futures may find resistance at the 50-day moving average this week near $2.7133.
- Nymex heating oil net length rose by 1.8k lots last week. (COT)
Gasoline
- Nymex gasoline rose into overbought territory on a 14-day RSI for the first time since July.
- Gasoline stocks have fallen 4 of the last 5 week but remain 5 million barrels above year-ago levels.
- Nymex gasoline net length fell by 422 lots last week. (COT)
Propane
- Conway is trading at .8075 while Belvieu is trading at .8375.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.8200.
- Propane’s value to crude may provide a cushion to resist moving higher with crude.
Natural Gas
- Overnight weather runs removed 12 HDDs in the two week forecast.
- Gas producer EQT announced they will curtail production by 1 Bcf/d due to low prices and elevated storage.
- Baker Hughes reported nat gas rigs fell by 1 to 119 last week.
April Daily RBOB: Nymex gasoline futures remain in an extremely bullish tilt which could translate to higher prices at the pump ahead of the summer driving season. The market has begun to tip overbought which could halt momentum temporarily.
