Outlook: Energies are surging this morning in anticipation of an Iranian military response that could occur over the weekend. The scale of the response is unknown, and fear of further escalation is provoking a strong shift in risk-on sentiment. The high-risk scenario is that escalation spills over to Iranian oil infrastructure or a complete shutdown of the Strait of Hormuz, which traffics 20% of global oil demand. WTI is up over 2 dollars this morning and will look to chase down the recent April 5th high of $87.63. The US dollar is sharply higher again today pushing equities lower, however, outside market influence doesn’t appear to be spilling over to energies today. Refined products are along for the ride today with gas and diesel up 6 and 7 cents respectively. The complex will remain extremely sensitive to any rhetoric regarding the Middle East conflict that develops today and volatile swings could be on the table.
Crude
- Energies look to be in risk-on mode in preparation for an Iranian retaliation expected this weekend.
- The IEA released its monthly report today and kept its oil demand forecast unchanged at 103.2 mbpd for 2024 and 104.3 mbpd for 2025.
- The IEA cut their 2024 oil demand forecast by 100,000 bpd to 1.2 mbpd.
- OPEC released its monthly report yesterday which left 2024 and 2025 oil demand growth unchanged at 2.25 mbpd and 1.85 mbpd, respectively.
- Chinese March crude imports fell 6% m/m. While usually a compelling data point, concerns in the Middle East are taking priority today.
- Baker Hughes will report its rig count at 12:00 pm CT.
- Michigan consumer sentiment will be reported at 9:00 am CT.
- As of 8:36 am CST: Brent crude oil up $2.00 to $91.74, US dollar index up $0.745 to 106.023 while the nearby e-mini S&P 500 futures contract is down 33.25 to 5210.00.
Diesel
- The prompt diesel spread has flipped into contango and could be viewed as a bearish indicator reflecting ample supply.
- Gasoil stocks at Europe’s ARA hub rose by 1.5% to 2.15mmt last week.
- Singapore middle distillate stocks rose to a 2.5 year high at 11.2 million barrels last week.
Gasoline
- Gasoline’s premium to diesel has expanded to over 12 cents in the prompt, but this spread could face pressure as refineries begin to pump more gasoline.
- Gasoline stocks at Europe’s ARA hub fell 7% last week to 1.13mmt, lowest since February.
- Singapore light distillate stocks rose to a 6-week high of 16.05 million barrels last week.
Propane
- Conway is trading at .7575 while Belvieu is trading at .7925.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.8100.
- Conway propane is trading at 38% to WTI.
- Propane stocks saw a surprise draw of 105,000 barrels last week. Stocks remain 4 million barrels above 5-year average levels.
- Propane is beginning to face seasonal headwinds but a strong crude move today may be offsetting.
Natural Gas
- Overnight weather runs added 11 TDDs to the two-week forecast.
- Nat gas flows to Freeport LNG export facility are seen down today after the company said a liquefaction train at the plant tripped.
- The EIA reported natural gas stocks rose 24 Bcf, which exceeded the average estimate.
Continuous HO Spread: Diesel has flipped back into contango which signals ample supply with nearby values discounted to deferred. This market condition can be seen as bearish but will be discounted today with larger forces at play.
