Scott Wilson
Outlook: Energies are down this morning as investors digest the negative U.S. economic news reported yesterday and how the Fed could respond moving forward. Interest rate cuts are more than likely off the table at the Fed’s next two meetings on May 1 and June 12, but if the U.S. economy continues to shrink, the rate cut discussion could once again come to the forefront. Tomorrow’s GDP data could also give an indication of the path the Fed could take moving forward. The U.S. economy has remained resilient, even with the current high interest rate environment. In the equity market, earnings season has been solid so far with three out of every four companies exceeding Wall Street expectations, according to FactSet. There is a positive correlation between the U.S. equity market and crude prices so the big day in equities yesterday could have been a component of yesterday’s crude strength. Israel intends to evacuate Palestinian civilians from the city of Rafah in the coming weeks before an assault on the city. Rafah’s population has increased by more than 1 million people who fled the Israeli offensive over the last few months. Even with the continued fighting and potential for additional geopolitical risk premium, Goldman Sachs analysts put a ceiling of $90 per barrel on Brent crude which would equate to a ceiling of around $85 for WTI. We talked yesterday afternoon about how the 50-day moving average was a level of support for crude futures. On the flipside, the 9-day moving average has been a level of resistance for crude futures for the past week. As the 9-day and 50-day moving averages converge, a breakout to one side could create momentum for direction in the near term.
Crude
- Russia expects to export 4.82 mbpd this year which is close to unchanged from 2023 levels. (BBG)
- OPEC announced a potential partnership with the South African nation of Namibia, who is expected to produce 700,000 bpd of oil by the end of the decade. (BBG)
- Italy’s total oil product sales fell by 3.8% in March y/y. This marked the first monthly y/y retreat since December. (BBG)
- China’s Iranian oil imports are expected to remain steady regardless of fresh US sanctions as they utilize more ship-to-ship transfers. (BBG)
- Reuters estimates crude stocks rose 0.8 million barrels last week.
- The API survey showed crude stocks fell 3.2 million barrels last week.
- The EIA will report inventories at 9:30 am CT.
- GDP on Thursday and PCE on Friday will be the macroeconomic reports in focus this week.
- As of 8:24 am CST: Brent crude oil down $0.41 to $88.01, US dollar index up $0.187 to 105.861 while the nearby e-mini S&P 500 futures contract is up 7.25 to 5114.00.
Diesel
- Reuters estimates diesel stocks fell 1.1 million barrels last week.
- The API survey showed diesel stocks rose 0.7 million barrels last week.
- 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.
- LTD for May HO is Tuesday April 31st.
Gasoline
- Reuters estimates gasoline stocks fell 1.8 million barrels last week.
- The API survey showed gasoline stocks fell 0.6 million barrels last week.
- LTD for May RBOB is Tuesday April 31st.
Propane
- Conway is trading at .7325 while Belvieu is trading at .7700.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7975.
- Conway propane is trading at 37% to WTI.
- OPIS estimates propane stocks rose 2.3 million barrels last week.
- Look for the crude trend to dictate direction for the propane market near-term.
Natural Gas
- Overnight weather runs were unchanged for the two-week forecast.
- Power draw at freeport LNG fell back to near zero yesterday.
- Reuters estimates nat gas stocks rose between 60 and 86 Bcf last week.
Iranian Oil Flows: China remains the biggest buyer of Iranian oil despite US sanctions. The teapot refiners are expected to increase the utilization of ship-to-ship transfers to decrease scrutiny of the purchases.
