Scott Wilson
CHS Hedging will be closed on Monday in observance of the Memorial Day holiday.
Energy markets trade from Sunday at 5:00 pm CT through Monday at 1:30 pm CT with a halt, then resume Monday evening at 5:00 pm CT.
If a need arises, please email energy@chshedging.com and we will connect as soon as we are able.
Outlook: The energy complex is trading higher this morning after starting the overnight session lower. OPEC+ announced the group has pushed its output policy meeting a day to June 2, and will hold the meeting online instead of in Vienna. There is a great deal of speculation surrounding the meeting and how the group will handle their 2.2 million bpd supply cut. A few weeks ago, when oil prices were under upward pressure due to geopolitical tensions, the expectation was the group would unwind at least a portion of the supply cut starting in July. However, as geopolitical tensions have eased and the U.S. Federal Reserve has continued with a restrictive monetary policy, the expectation is the group will extend the cut beyond the second quarter, possibly through year-end. The market should have this result priced in so I would not expect any large market reaction if this were the route they take. If OPEC+ would revise their supply cut and remove additional supply from the market, then we could see a price move to the upside. Expect the market to shift focus back to the economy and demand once the OPEC+ meeting concludes. Goldman Sachs moved their forecast for the Fed’s first rate cut back one meeting from July to September, but still expects two cuts total in 2024. CME interest rate traders agree with Goldman on the timeline for a first cut as the CME FedWatch Tool currently shows the probability of no cut in July at 89%, but the probability of a cut in September at 50%.
Crude
- Brent and WTI Crude markets posted fresh three-month lows in overnight trade.
- WTI continuous crude trading below all major moving averages.
- Brent to WTI premium of $4.33 near the top of the 5-year seasonal range.
- China’s independent oil processors are on track to take the lowest volume of Russian ESPO crude in over three years as refining profits shrink and other grades are offered at cheaper prices. (Bloomberg)
- Russia exceeded its crude production commitment for April and pledges to make up for the overproduction. (Bloomberg)
- India’s Russian oil imports rose to a nine-month high in April.
- Meteorologists are forecasting an intense Atlantic hurricane season this year; with 20-25 named storms; with a possibility of 30 or more. (AccuWeather)
- As of 9:00 am CST: Brent crude oil up $.40 to $81.76, US dollar index down $0.316 to 104.720 while the nearby e-mini S&P 500 futures contract is up 23 to 5308.25.
Diesel
- Diesel remains the weakest component of the energy complex as the heat crack spread remains at 24.
- Distillate futures are trading below all major moving averages.
- Distillate prices are currently trading near a nine-month low.
Gasoline
- Gasoline demand reached its highest level since November, the week ended May 17.
- AAA expects 43.8 million travelers to travel 50 miles or more this weekend, the highest number since AAA began tracking the data in 2020.
- National average gasoline pump prices for Memorial Day weekend will be similar to last year at $3.57.
Propane
- Conway is trading at .7025 while Belvieu is trading at .7200.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7562.
- Conway propane is trading at 38% to WTI.
Natural Gas
- Natural gas prices are down 11% over the last two trading sessions.
- May analysts believe the U.S. natural gas rally has run its course and expect prices to settle in around $2.50.
- Natural gas injection of 78 Bcf was lower than projections of 86-89 Bcf.
U.S. Gasoline Demand:
