Outlook: The energy complex is on track for its largest weekly loss in three months this week. Crude and gasoline are on pace for 5% weekly losses while diesel is on track for a 3% weekly loss. Bearish sentiment may look to continue next week with several contracts testing support at key weekly levels. Propane and diesel prices have fallen to price points that look much more favorable to the end user and an uptick in buying interest could provide marginal support. Economic headwinds and a growing global surplus in diesel may keep it the weakest leg of the complex if energies find bullish steam. Nonfarm payroll data reflected a weaker-than-expected labor market this morning which the Fed would find supportive in taming inflation. The Fed remains concerned about its progress so far and inflationary concerns can create a risk-on environment for commodities. It appears, however, that energies have been overvalued with too much geopolitical risk premium to ride that wave. The US dollar is down nearly 500 points today but energies look to be unaffected as they begin to slip into the red.
Crude
- Oil is on track for its sharpest weekly decline in three months.
- Three sources from OPEC+ said it could extend its voluntary oil output cuts of 2.2 mbpd beyond June.
- JPMorgan views the selloff over the last two days as collateral damage from the Fed repricing and non-fundamental in structure.
- Crude spreads have softened considerably this week, adding to bearish sentiment.
- WTI is testing weekly support at its 50-week moving average near $78.90. The 200-week moving average sits at $75.10.
- Nonfarm payrolls were reported at 175k vs 243k est.
- Baker Hughes will report rig counts at 12:00 pm CT.
- As of 8:48 am CST: Brent crude oil up $0.26 to $83.70, US dollar index up $0.046 to 105.801 while the nearby e-mini S&P 500 futures contract is up 12.25 to 5058.00.
Diesel
- Buying interest in diesel has picked up with values trading near or below $2.50 down the curve.
- Spot basis remains soft with planting delays allowing terminals to keep pace with demand.
- Europe’s ARA gasoil stocks rose 3% last week to a 10-month high.
- A global diesel glut will be a limiting upside factor for diesel prices near-term.
Gasoline
- AAA reports the national average retail gas price at $3.66, up 12 cents from a month ago.
- Implied gasoline demand, which includes exports, has fallen to its lowest seasonal level since 2013 if excluding 2020. The metric has fallen for four straight weeks.
- Continuous RBOB is testing support at its 100-week moving average near $2.6046. The 50-week moving average sits at $2.4853.
Propane
- Conway is trading at .6875 while Belvieu is trading at .7125.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7600.
- Conway propane is trading at 37% to WTI.
- Spot Conway is off another 2 cents this morning and prices down the curve have fallen to values that have been historically good buy zones. Please reach out for updated swap quotes.
Natural Gas
- Overnight weather runs removed 4 TDDs for the two-week forecast.
- The EIA reported nat gas stocks rose 59 Bcf to 2,048 Bcf last week, exceeding the average estimate.
- Natural gas stocks remain 642 Bcf higher than 5-year average levels.
Continuous Weekly WTI: WTI futures are testing key weekly support this week. A close below would be a bearish signal and potentially allow for a test of $75.
