Outlook: Despite the minimal pop yesterday, the bears look to maintain control with energies falling again today. WTI futures are testing support, currently trading below the 50-day moving average of $81.22. WTI hasn’t closed below the 50-day since early February and such an event will be closely tracked today for indication of further downside. On the fundamental front, additional sanctions from the EU and US on Iran are expected to pass this week. Iranian oil exports have proven resilient to sanctions already in place which leaves traders hesitant to believe this package will result in anything different. A tighter fundamental environment from sanctions would also be counterintuitive to the Biden Administration's goal of suppressing fuel prices this summer. It’s becoming more clear that without geopolitical escalation or further physical supply disruptions, the market feels overvalued and oversupplied. If demand remains under pressure from higher interest rates this summer, a lower trade range should be expected. Be mindful if you’re holding long hedges with May product futures set to expire on Tuesday. If product has been delivered on these hedges, you don’t want to be holding positions through a downtrend this week. It may be too early to call the weekly trend but it will be worth monitoring on a daily basis.
Crude
- The US Senate will begin considering a foreign aid package that includes sanctions on Iran’s oil exports. The package is expected to be signed off by the Biden Administration later this week. (Reuters)
- EU foreign ministers agreed in principle on Monday to expand sanctions on Iran. (Reuters)
- Wildfires have again ignited in Canada’s main oil-producing province of Alberta. Last year ~300,000 bpd of oil production was shut-in due to fires.
- The Brent options skew is once again showing premium to puts as geopolitical risk premium fades from the market.
- Prompt continuous WTI is testing support at its 50-day MA today near $81.22.
- Reuters estimates crude stocks rose 1.8 million barrels last week.
- The API will report its inventory survey today at 3:30 pm CT.
- GDP on Thursday and PCE on Friday will be the macroeconomic reports in focus this week.
- As of 8:18 am CST: Brent crude oil down $0.68 to $86.32, US dollar index down $0.067 to 106.010 while the nearby e-mini S&P 500 futures contract is up 20.25 to 5067.00.
Diesel
- Reuters estimates diesel stocks fell 900,000 barrels last week.
- Diesel traded below its lower Bollinger band for the third consecutive day yesterday.
- Those with long hedges heading into expiration on Monday should consider selling to avoid slippage on gallons that have already been delivered on the physical side.
Gasoline
- Reuters estimates gasoline stocks fell 1.4 million barrels last week.
- Gasoline futures remain vulnerable to the unwinding of RBOB-HO spreads heading into expiration.
Propane
- Conway is trading at .7375 while Belvieu is trading at .7700.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7975.
- Conway propane is trading at 38% to WTI.
Natural Gas
- Overnight weather runs removed 2 TDDs to the two-week forecast.
- Electricity consumption rose at Freeport LNG rose over the weekend which could hint toward a restart at the facility following two weeks of maintenance.
- Reuters estimates nat gas stocks rose between 60 and 86 Bcf last week.
Brent Options Skew: Oil options markets are reflecting the unwinding of geopolitical risk premium with the skew flipping back to favor puts.
