Outlook: Energies are beginning to slip after spending a brief stint positive earlier this morning. Ceasefire discussions came and went yesterday without a resolution, however, terms are still under consideration. While a chunk of risk premium has already left the market, the psychological and reactionary impact of an agreement could push crude back below $80. Macroeconomic pressure continues to weigh on prices along with the fading geopolitical risk. Chinese economic data show better than expected performance from the manufacturing sector for April but the non-manufacturing sector underperformed at a greater level to provide an overall disappointing tone. A hawkish feel is looming ahead of the US Federal Reserve meeting tomorrow where interest rates are expected to be left unchanged. Fed Fund futures are showing a growing probability for a rate hike as the economy tracks on a resilient path despite already elevated interest rates. The bulls will hope for help from the API this afternoon with Reuters expected draws for both crude and products. The EIA will report inventories tomorrow morning at 9:30 am CT.
Crude
- Russian oil exports have declined for a second consecutive week resulting in a decline of 100,000 bpd to 3.58 mbpd for the four-week average.
- Chinese manufacturing data exceeded estimates last night and continues to reflect growth. The service sector however fell a full point below the consensus print.
- India has purchased its first batch of Canadian crude through the new TMX pipeline.
- A Reuters poll forecasts WTI to average $80.46 in 2024 vs $78.09 in the previous March poll.
- Reuters estimates crude stocks fell 800,000 barrels last week.
- The API will report its inventory survey today at 3:30 pm CT.
- The Fed will meet on Wednesday and is not expected to make any policy changes.
- As of 8:47 am CST: Brent crude oil down $0.43 to $87.97, US dollar index up $0.372 to 105.958 while the nearby e-mini S&P 500 futures contract is down 10.25 to 5136.00.
Diesel
- China lowered its retail gasoline and diesel prices which may indicate weaker demand.
- Prompt HO Futures are testing resistance at the 9-day moving average today. A close above would be viewed as technically supportive.
- Reuters estimates diesel stocks fell 500,000 barrels last week.
- Today is LTD for May HO.
Gasoline
- Reuters estimates gasoline stocks fell 1 million barrels last week.
- Today is LTD for May RBOB.
Propane
- Conway is trading at .7425 while Belvieu is trading at .7750.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.8075.
- Conway propane is trading at 37% to WTI.
Natural Gas
- Overnight weather runs added 9 TDDs for the two-week forecast.
- Freeport LNG has been steadily increasing flows as it returns from a maintenance cycle. Gas flows are expected to rise 30% today.
- Reuters estimates nat gas stocks rose 52 to 56 Bcf last week.
Continuous HO spread: The prompt diesel spread has slipped to its deepest contango since 2020. This market structure typically indicates soft demand or oversupply.
