Outlook: Energies are mostly stronger with the exception of diesel which is lagging near unchanged this morning. Crude is seeing a clearly defined support zone near $78 and has bounced off this level in the last two sessions. The 3-2-1 crack spread has been on a steady decline since early March and has fallen to its lowest level since mid-February which may indicate weaker demand. Headlines over the weekend are painting a more bullish picture, especially with Saudi Arabia increasing their oil price to Asia once again. OPEC remains the most bullish of the big three for global oil demand growth this year and a lot of that is attributed to their view on Asian demand growth. OPEC will release its monthly report next week and after a Saudi price increase, its likely their bullish view will remain intact. Geopolitical risk premium may also be working its way back in with Israel making moves that indicate an invasion of Gaza is imminent. Lastly, global crude in floating storage saw a significant decline w/w to provide fundamental support.
Crude
- Israel’s military has begun moving civilians out of Rafah, hinting toward the long expected attack on the Gazan city. (BBG)
- Saudi Arabia increased its oil prices to Asia for the third consecutive month in June.
- Global crude in floating storage fell 14% last week to 57.76 mb, according to Bloomberg citing Vortexa data.
- Continuous WTI futures found support on its 100-day moving average last Friday and have again bounced off this level today.
- The Nymex 3-2-1 crack has fallen to its lowest levels since mid-February which may indicate weak demand.
- China’s services activity remained in expansion for the 16th consecutive month in April.
- Baker Hughes reported oil rig counts fell by 7 to 499 last week.
- As of 8:13 am CST: Brent crude oil up $0.59 to $83.55, US dollar index down $0.129 to 104.901 while the nearby e-mini S&P 500 futures contract is up 19.25 to 5173.00.
Diesel
- The diesel curve remains in Contango through the November futures contract.
- A dyer weather forecast should support stronger planting progress over the next 10 days.
- Managed money HO net length decreased by 5.5k lots last week. (COT)
Gasoline
- RBOB futures are showing independent strength relative to diesel despite RBOB cracks starting the week softer once again.
- Managed money RBOB net length fell by 5.0k lots last week. (COT)
Propane
- Conway is trading at .6750 while Belvieu is trading at .6825.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7400.
- Conway propane is trading at 37% to WTI.
Natural Gas
- Overnight weather runs removed 4 TDDs for the two-week forecast.
- Total LNG feedgas demand in April was 11.9 Bcf/d vs 13.1 Bcf/d in March.
- Baker Hughes reported nat gas rigs fell by 3 to 102.
Continuous Daily WTI: Crude is finding support on its 100-day moving average which is also reinforced by trendline support. Expect a move toward $75 if these support levels are breached this week.
