Outlook: Energies are lacking conviction this morning with no clear indication on how tension in the Middle East will play out. Some analysts believe the conflict will remain contained and this next move by Israel may dictate whether that opinion is correct. Both sides have said any further attacks will be met with retaliation and what’s becoming more clear is that this conflict feels far from over. The US has already made moves to tighten sanctions on Iran but it remains to be seen whether the bill will pass or whether it can be enforced. Other global drivers today include higher Chinese refinery throughput in Q1 y/y which is being offset by reports that Russian crude exports have hit an 11-month high. Chinese economic data was also mixed overnight to add to the choppy trade. We’ll look for more definition on the fundamental front with the release of the API inventory survey this afternoon while the market will remain vulnerable to volatile swings from geopolitical rhetoric.
Crude
- The US House voted to sanction Chinese purchases of Iranian oil which could contribute to a tighter market if it passes the Senate and is adequately enforced.
- China’s January-March refinery throughput was reported at 2.4% above year-ago levels.
- Russia’s seaborne crude exports rose to an 11-month high in the second week of April. Due to refinery outages, Russia is expected to export more crude unless production is cut.
- The WTI prompt spread has fallen to its lowest level in 3-weeks but still remains backwardated.
- Reuters estimates crude stocks rose 400,000 barrels last week. If confirmed on Wednesday, it would be the fourth consecutive week of builds.
- The API will report its inventory survey this afternoon at 3:30pm CT.
- China’s Q1 GDP beat estimates at 5.3% while industrial production and retail sales in March fell short of expectations.
- As of 8:08 am CST: Brent crude oil down $0.63 to $89.47, US dollar index down $0.031 to 106.176 while the nearby e-mini S&P 500 futures contract is up 6.25 to 5111.00.
Diesel
- Reuters estimates diesel stocks rose 100,000 barrels last week.
- The Nymex diesel crack has fallen to its lowest level since last May.
Gasoline
- Reuters estimates gasoline stocks fell 1 million barrels last week.
- The Biden Administration indicated they may tap the SPR this summer to hold down pump prices.
- Bullish sentiment in the gasoline market is at its highest level since February of 2020 based on the net spec and fund long position.
Propane
- Conway is trading at .7625 while Belvieu is trading at .7950.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.8225.
- Conway propane is trading at 38% to WTI.
- A correction lower in crude in the coming weeks may provide a buying opportunity for those looking to add length.
Natural Gas
- Overnight weather runs added 2 TDDs to the two-week forecast.
- Freeport LNG was reported to be nearly completely idle as of yesterday which continues to pressure demand lower along with prices.
- Reuters estimates nat gas stocks rose between 48 and 56 Bcf last week.
Continuous Daily HO Crack: With a fresh low by a point, the prompt diesel crack has fallen to its lowest level since May.
