Outlook: The energy complex is looking to maintain bullish momentum into the weekend and crude will look to close higher for the 6th time in the last 7 sessions. Anticipation of an Iranian response to Israel's strike in Syria earlier this week is certainly provoking risk-on sentiment. It’s also expected that Ukraine will continue to target Russian oil infrastructure after displaying a deeper strike range this week than previously estimated. Global demand has also leaned positive this week to add to bullish fuel with positive economic data out of China and Saudi Arabia increasing oil prices to Asia. Markets are flirting with overbought territory and the risk of a profit-taking slide remains a downside risk short term. Nonfarm payroll data ran hot today showing more job growth than anticipated. The risk of rate cuts being pushed back is rising, and the US dollar is responding higher today which could provide headwinds.
Crude
- Positive economic data from China and heightened geopolitical risk were the primary bullish drivers in energy this week.
- Saudi Arabia raised its May Arab Light crude oil OSP to Asia which is viewed as a positive demand signal.
- The UAE has ended diplomatic ties with Israel.
- Israel is put its embassies around the world on high alert due to the expected Iranian retaliation.
- NATO said on Thursday that more than 15% of Russia’s crude processing capacity may be offline due to Ukrainian drone strikes.
- Brent crude closed above $90 yesterday.
- Baker Hughes will report rig counts at 12:00 pm CT.
- Fed members yesterday floated the idea that rates may not be cut this year if inflation remains sticky.
- Nonfarm payrolls were reported at 303k vs 270k est.
- As of 8:04 am CST: Brent crude oil up $0.32 to $90.95, US dollar index up $0.469 to 104.590 while the nearby e-mini S&P 500 futures contract is up 12.25 to 5209.00.
Diesel
- Group 3 diesel basis remains near 5-year lows and me be presenting an opportunity to fill storage and sell futures to go long basis.
- Colorado State University predicts a highly active hurricane season this year which presents upside risk to the fuel market. Consider basis swaps to establish broader coverage for anticipated sales.
- Gasoil stocks at Europe’s ARA hub rose to 9-month highs over the last week at 2.12 million tons.
- Singapore middle distillate stocks rose 167,000 barrels over the last week to 10.3 million barrels which is a 2-week high.
Gasoline
- Gasoline stocks at Europe’s ARA hub fell 2.6% over the last week to 1.22 million tons.
- Singapore light distillate stocks fell 32,000 barrels to a two week low 15.2 million barrels.
Propane
- Conway is trading at .8075 while Belvieu is trading at .8525.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.8500.
- Conway propane is trading at 38% to WTI.
- The EIA reported propane stocks fell 354,000 barrels last week while the market expected a build.
- Propane markets continue to be tugged higher by higher crude prices.
Natural Gas
- Overnight weather runs added 2 HDDs in the two-week forecast.
- The EIA reported natural gas stocks rose 37 Bcf last week.
- Total gas storage is 633 Bcf above the 5-year average of 1,626 Bcf.
Continuous Weekly WTI: WTI is looking at a successful challenge of its 100-week moving average this week. The bulls will set their sites on $90 next week if they manage to hold momentum.
