Outlook: Despite several bearish technical indicators yesterday, the energy complex is finding strength today. A lower US dollar, stronger outside markets, and simply value buying ahead of the long holiday weekend may be the drivers today. From a fundamental standpoint, markets are well supplied and demand has yet to show enough strength to tip the scale in favor of the bulls. A strong gasoline demand reading was well received yesterday but crack spreads remain sluggish suggesting the boost may be short-lived. AAA has the average retail gas price in the US 7 cents higher than it was last year and with higher interest rates pressuring consumer spending, summer travel may be susceptible to slowing this year. Diesel prices have settled in between $2.40 and $2.50 throughout May and we still view these levels as good buying opportunities relative to historical averages. Contango in both the futures and basis markets also show benefit to storing product which can be hedged by selling futures to remain long basis to take advantage of discounts. A few economic reports could cause swings in the dollar before the end of the week, but all eyes are on the OPEC meeting scheduled for June 1st.
Crude
- Prompt WTI closed below $78 for the first time in 16 sessions yesterday.
- Markets are finding a boost on a weaker dollar and pre-holiday weekend positioning.
- The WTI curve remains backwardated but global supply views suggest ample supply.
- The Fed minutes yesterday didn’t reveal any new opinions but maintained the outlook of uncertainty and that interest rates may need to stay higher for longer.
- Refinery utilization rose
- The EIA reported crude stocks rose 1.8 million barrels last week vs -2.5 mb est.
- OPEC+ will meet on June 1st and is expected to leave output unchanged.
- As of 8:38 am CST: Brent crude oil up $0.90 to $82.80, US dollar index down $0.291 to 104.642 while the nearby e-mini S&P 500 futures contract is up 18.25 to 5345.00.
Diesel
- The EIA reported diesel stocks rose by 400,000 barrels last week vs -400k est.
- Passenger throughput over Memorial Day is expected to be up 4.8% from last year and 9.3% above 2019 levels.
Gasoline
- The EIA reported gasoline stocks fell 900,000 barrels last week vs -700k est.
- US gasoline demand rose back above 9 mbpd last week which is viewed as supportive. Record travel is expected over the upcoming holiday weekend.
- Continuous RBOB closed below its 100-day moving average yesterday. The 200-day moving average sits further below at $2.4355.
Propane
- Conway is trading at .6875 while Belvieu is trading at .7075.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7500.
- Conway propane is trading at 37% to WTI.
- The EIA reported propane stocks rose 2.2 million barrels last week vs +2.7mb est.
- Propane prices moved higher against crude yesterday and may draft additional support from higher energies today.
Natural Gas
- Overnight weather runs added 3 TDDs to the two-week forecast.
- Reuters estimates natural gas stocks rose between 82 and 91 Bcf last week.
- The EIA will report inventories at 9:30 am CT today.
- Yesterday, natural gas demand sat at 96.2 Bcf/d while production was reported at 97.3 Bcf/d.
Continuous Daily RBOB: Prompt gasoline futures closed below the 100-day moving average yesterday, and despite the pop today, may clear the way for a move lower if bearish pressures remain persistent.
