Outlook: Energies are looking to snap a two-week losing streak and are holding marginal gains here this morning. The market is trying to assess the appropriate amount of risk premium for the Middle East conflict as Israel ramps up strikes on Gaza again. The international community has warned of mass casualties and any aggression from Iran could stoke fears. Outside markets are also supporting a broader move on strong earnings this week. PCE data for Q1 and April released this week ran hot, however, the low Q1 GDP print may be helping offset the hawkish development. Higher energy prices do threaten inflationary progress; however, ample spare global capacity should keep any significant run-ups short-lived. Last year, implied gasoline demand saw sharp growth in May heading into the driving season and will be something to closely monitor again this year. Crack spreads favor high utilization rates but total production capacity still lags pre-pandemic levels which could contribute to tighter stocks. Prices at the pump will be a focal point heading into the election this fall.
Crude
- Oil prices are on track to snap the streak of two consecutive weeks of losses.
- Israel has intensified airstrikes in southern Gaza, reminding traders that the conflict still presents upside risk.
- Outside markets have found support from a strong week for earnings which may be spilling over to energy futures.
- Continuous WTI closed above its 9-day moving average which is supportive of a short-term uptrend.
- Both Core and headline PCE posted 0.1% above consensus this morning. This is a preferred metric of inflation for the Fed and their interest rate decisions.
- Baker Hughes will report rig counts at 12:00pm CT.
- As of 8:12 am CST: Brent crude oil up $0.58 to $89.59, US dollar index up $0.143 to 105.741 while the nearby e-mini S&P 500 futures contract is up 32.25 to 5115.00.
Diesel
- Continuous HO is testing support at its 9-day moving average again today, a close above would be viewed as bullish.
- Those with long hedges heading into expiration on Tuesday 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
- Continuous RBOB closed above its 9-day moving average yesterday which supports a short-term uptrend.
- Chinese traffic congestion rose again in the latest figures, following a trend of strong growth over the last two weeks.
- ARA gasoline stocks rose last week along with Chinese gasoline stocks which hit a two-month high.
- Tuesday is LTD for May RBOB.
Propane
- Conway is trading at .7425 while Belvieu is trading at .7775.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.8100.
- Conway propane is trading at 37% to WTI.
Natural Gas
- Overnight weather runs added 5 TDDs for the two-week forecast.
- Freeport LNG report a trip on its third train yesterday.
- The EIA reported national gas stocks rose 92 Bcf last week, which exceeded most estimates.
- Today is LTD for May NG.
Continuous Monthly NG: The prompt natural gas contract has once again tumbled near multi-decade lows this month. Maintenance at Freeport has decreased feedgas demand, backlogging supplies in a market that was already sitting on a lofty surplus. $1.432 was the low back in 2020 and will be a stretch for the bears with today being LTD for the May contract.
