Outlook: The energy complex is beginning the week with a softer tone despite the Iranian offensive on Saturday. The general view of the attack was performative and well telegraphed which allowed Israel to shoot down nearly all of the missiles and drones. There were no reported deaths and very minimal damage reported for those that snuck through but the ball will now roll back to Israel who has said they are prepared to respond. If Israel decides to respond with another round of strikes, it's likely Iran will take more aggressive action, and risk premium will remain strong. Additionally, if Israel were to target Iranian oil infrastructure, up to 3 mbpd of oil production could be at risk and would turn fear into real fundamental disruption. Expect volatility to increase this week as it follows the developing situation with headline risk on both sides.
Crude
- Iran launched a significant counter-offensive on Saturday which included over 300 drones and missiles. The large majority of the attack was intercepted by Israel’s defense systems.
- Iran says it considers the retaliation to be over but there’s uncertainty on how Israel will respond.
- The US House is set to vote today on legislation aimed at countering China’s purchases of Iranian crude. Roughly 80% of Iranian oil exports go to China’s independent refiners.
- Global crude in floating storage rose 11% last week.
- Baker Hughes reported US oil rigs fell by 2 to 506 last week.
- As of 8:38 am CST: Brent crude oil down $0.79 to $89.66, US dollar index down $0.015 to 106.023 while the nearby e-mini S&P 500 futures contract is up 39.25 to 5206.00.
Diesel
- Russian refineries churned 5.24 mbpd last week which hovers near 11-month lows.
- Valero’s Memphis refinery will shut down its 80,000 bpd crude processing unit for maintenance through the second week of May.
- PBF Energy’s 173,000 bpd Toledo refinery is expected to complete maintenance on multiple units next week.
- Managed money added 2,662 contracts and are net long 8,533 contracts
Gasoline
- AAA reports the national average gas price at $3.63, up 20 cents from month-ago levels.
- RBOB is nearing the longest net spec level since the beginning of the pandemic with managed money increasing net length by 1,294 contracts to a net long 84,926 contracts.
Propane
- Conway is trading at .7625 while Belvieu is trading at .7975.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.8225.
- Conway propane is trading at 38% to WTI.
Natural Gas
- Overnight weather runs added 2 TDDs to the two-week forecast.
- Baker Hughes reported nat gas rigs fell by 1 to 109 last week.
- Managed money decreased net length by 4.9k lots last week.
Continuous Daily WTI: Crude spreads have been on the decline this month but still remain backwardated. Floating storage in the Gulf rose 242% last week signaling a slowdown in exports.
