Outlook: Energies are steady this morning after the release of inflation data in the U.S. and Europe. The April Personal Consumption Expenditures Price Index (PCE), the Federal Reserve’s favorite inflation gauge, was released this morning and there were no deviations from projections (numbers below). All month-over-month and year-over-year data matched expectations, so the report is not expected to change the timetable for the Fed to cut interest rates. The CME Fedwatch Tool is still forecasting a 50% chance for a Fed rate cut at the September 18 meeting. The energy market so far has viewed the report as a non-event but the dollar is trading lower on the PCE data. According to Eurostat data, eurozone inflation rose more than expected in May. Analysts believe the increase is unlikely to deter the European Central Bank (ECB) from cutting borrowing costs next week but think it could slow or halt the rate-cutting cycle in the coming months. Traders will now turn their attention to the OPEC meeting on Sunday for direction in the market, where the expectation is an extension of current voluntary production cuts. Reuters conducted a poll of 41 analysts and economists over the last two weeks regarding the 2024 oil price forecast. Those surveyed lowered their 2024 oil price forecast for the first time since February, citing lower risks to supply from the conflicts in the Middle East and Ukraine. The survey results showed Brent crude averaging $84.01 per barrel in 2024 with U.S. crude at $79.56, down from April forecasts of $84.62 and $80.46, respectively.
Crude
- April PCE 0.3% month-over-month, projected 0.3% month-over-month
- April Core PCE 0.2% month-over-month, projected 0.2% month-over-month
- April PCE 2.7% year-over-year, projected 2.7% year-over-year
- April Core PCE 2.8% year-over-year, projected 2.8% year-over-year
- US EIA crude stocks reached a 5-week low this week as refinery utilization reached its highest level since August and US refinery net input climbed above 17 million bpd for the first time since December 2019.
- Crude stocks stand 19.242 million barrels below the five-year average.
- The spread between lead month and second month Brent crude closed yesterday in contango for the first time this year, indicating a sufficiently supplied global oil market.
- Japanese April crude oil imports declined by 8.6% on a year-over-year basis and a 22% rise in weekly Shanghai medium sour crude stockpiles.
- As of 9:00 am CST: Brent crude oil up $0.02 to $81.88, US dollar index down $0.258 to 104.440 while the nearby e-mini S&P 500 futures contract is down 1.75 to 5251.25.
Diesel
- Distillate inventories are 6% below the five-year average for this time of year but at a 13-week high.
- Average total distillate demand the past four weeks was down almost 4% compared to last year.
- The 9-day moving average crossed below the 20-day, indicating a possible short-term downtrend.
Gasoline
- Gasoline inventories are 1% below the five-year average for this time of year but at a nine-week high.
- Average total gasoline demand for the past four weeks was down 1.7% compared to last year.
- Gasoline futures upside momentum is being capped by the 200-day moving average.
Propane
- Conway is trading at .6950 while Belvieu is trading at .7125.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7614.
- Conway propane is trading at 36% to WTI.
Natural Gas
- The EIA reported a natural gas injection of 84 Bcf, higher than most projections.
- Natural gas storage stands at 26.5% above the 5-year average.
- Near-record high temperatures in India pushed peak electric demand to a new record high yesterday, increasing gas demand by as much as 12% year-over-year. GS
