Outlook: Energies are trading lower this morning despite a bullish API report that showed a draw of almost 6.5 million barrels for crude, well above the Reuters poll of 1.9 million barrels. We’ll see where the DOEs report at 10 am CT. Barring some big news at the end of the week to move the market in a particular direction, expect prices to remain rangebound until inflation data is reported on Friday, and possibly until after the OPEC meeting on Sunday. This puts crude futures in the $78-$80 range and gasoline and diesel futures in the $2.40-$2.50 range. U.S. refinery activity last week was running about 3% above capacity compared to the five-year average. When looking at historical numbers, refinery utilization is expected to increase over the next several weeks and fall off after the summer driving season in late August/early September. The 5:3:2, 3:2:1, and gasoline cracks all touched their lowest level in over two months this morning, while the heat crack is at its weakest level since December 2021. With the current market structure and crack spreads this weak we should expect crude prices to decrease relative to product prices or a reduction in refinery activity in the near future. The U.S. economy grew slower than originally estimated after a downward revision was reported this morning. The U.S. Commerce reported a revised Q1 GDP down from 1.6% to 1.3% following recent softness in readings of retail sales and equipment spending. The core PCE price index, the Fed’s primary inflation gauge, was also revised down to 3.6% from the initial 3.7% that was reported on April 25. According to market participants surveyed by OPIS, the EIA is expected to report a 2.44 million barrel build in U.S. propane stocks, with a range between 1.75 million and 2.8 million barrels. The prior five-year average build is 1.72 million barrels.
Crude
- Goldman Sachs raised their global oil demand forecast and now has a base case that calls for a peak level of 110 million bpd by 2034, when demand will peak.
- Refinery efficiency of 91.7 last week is running 3% above the seasonal average.
- Crude futures trading back below the 100-day moving average and being supported by the 9-day.
- Saudi Aramco is forecasted to reduce the official selling price of Arab Light crude by 40 cents per barrel month-over-month for July sales to Asia, which would be the first decline in five months. GS
- Ahead of Q1 GDP revisions, markets were pricing in 49% odds that the first Fed rate cut will come by the September 18 meeting.
- As of 8:55 am CST: Brent crude oil down $0.50 to $83.10, US dollar index down $0.299 to 104.735 while the nearby e-mini S&P 500 futures contract is down 15 to 5269.00.
Diesel
- The TSA said last Friday’s travel broke a record set in November of 2.95 million airline passengers in a day.
- Heat crack spread at the lowest level since December 31, 2021.
- Key support level at $2.37 for diesel futures.
Gasoline
- The gasoline stock draw posted by the API was in line with seasonal tendencies.
- Gasoline crack spread is at the lowest level since accounting for the summer blend change on March 1.
- Key level of support at $2.41 for gasoline futures.
Propane
- Conway is trading at .7100 while Belvieu is trading at .7325.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7719.
- Conway propane is trading at 39% to WTI.
Natural Gas
- The EIA is expected to report a 78 Bcf injection into storage for the week ending May 24th.
- Yesterday’s June gas contract expired at $2.493/mmbtu yesterday, reversing Tuesday’s gains and closing down over 9 cents/mmbtu.
- Key level of support for natural gas is $2.576.
Heat crack spread at the lowest level since December 31, 2021:
