Outlook: Energies are trading higher this morning on what appears to be some stop-loss buying, short profit-taking, and a weaker dollar. Lead month crude futures are back in the $78-$80 range after settling outside for two sessions and are trading right at the 100-day moving average. The dollar is also trading at a fresh nine-day low giving some strength to energy prices. All eyes will be on inflation data this week in the U.S. and Europe, as well as the OPEC+ meeting on June 2. Yesterday, European Central Bank (ECB) policymakers said they have room to cut interest rates, and many believe they will do on June 6. Inflation data in the eurozone are due on Friday and should determine how the ECB responds the following week. Will a rate cut in the eurozone prompt U.S. policymakers to change their plan on interest rates? The U.S. Personal Consumption Expenditures (PCE) Index for April is due to be released on Friday and is viewed as the Fed’s preferred measure of inflation. The index measures the value of goods and services purchased by, or on behalf of, U.S. households. It’s used to gauge how much of a household’s earned income is spent on current consumptions. Forecasts are calling for a slowdown in PCE in April compared to March, which would mean higher interest rates are doing their job. An increase in PCE would signal higher interest rates for a longer period of time. Geopolitical tensions in the Middle East are also supportive for energy prices as fighting intensified in Gaza over the weekend, including an Israeli airstrike on a camp for displaced people in Rafah, which Prime Minister Benjamin Netanyahu called a tragic error. Several countries throughout the globe have been drawn into the conflict and now recognize Palestine as a sovereign and independent state.
Crude
- WTI crude trading above the 9-, 20-, and 100-day moving averages this morning.
- WTI managed money participants increased their WTI crude net length by 42,300 lots, including an increase of 14,500 long positions and a decrease in shorts by 27,800.
- Brent managed money participants decreased their net length by 66,600 lots, driven by a reduction in long positions of 38,400 lots, and an increase in short positions of 28,200 lots.
- Mexico’s crude exports dropped sharply by 31% in April.
- This week’s EIA is forecasting a draw of almost 2 million barrels.
- Crack spreads could narrow even more as U.S. refining activity is expected to increase further.
- OPEC+ is expected to extend oil supply curbs at its June 2nd meeting, limiting the downside for crude prices.
- As of 8:45 am CST: Brent crude oil up $1.47 to $83.59, US dollar index down $0.303 to 104.335 while the nearby e-mini S&P 500 futures contract is up 1 to 5322.50.
Diesel
- Diesel futures jumped above the 9 and 20-day moving averages this morning.
- With the exception of a few days in early May, the heat crack spread has been trading below 25 since April 18 (24.26 this morning) as diesel prices remain weak.
- NYMEX heating oil net length increased by 4,957 lots, including 3,436 longs and a reduction of 1,521 shorts.
Gasoline
- Gasoline futures are trading higher for the third straight session and are currently trading just under the 9-day moving average.
- The gasoline crack spread remains slightly better than the heat crack at 26.34.
- NYMEX gasoline net length increased by 251 lots, including 68 longs and a reduction of 183 shorts.
Propane
- Conway is trading at .7200 while Belvieu is trading at .7400.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7677.
- Conway propane is trading at 38% to WTI.
Natural Gas
- Natural gas prices hit a fresh one-week low in overnight trading.
- Natural gas inventory is 17.41% above the 5-year average.
- Natural gas spot prices are right in line with the 2023 average price at the moment.
Lead month WTI crude futures trading back between $78-$80 and the 100- and 200-day moving averages:
