Outlook: The energy complex continues its bearish trend in the wake of OPEC's production decision. Crude and diesel futures are trading lower for the fifth straight day, while gasoline is lower for the fourth time in five days. Crude futures are down almost 10% over the last five days while diesel and gasoline futures are down almost 9%. According to a Reuters survey, OPEC output rose 145,000 bpd in May to a total of 26.63 million bpd. The overproduction exceeded the group’s target by about 250,000 bpd for May, with the bulk of the additional supply coming from Nigeria and Iraq. We currently have a trifecta of overproduction news in the market in the wake of OPEC’s production decision, the fact they are already producing above target levels, and the expectation the U.S. will increase production in the second half of 2024. There was also some bearish economic news this morning that could translate to weaker oil and fuel demand. U.S. manufacturing activity slowed for a second straight month in May as new goods orders dropped by the most in nearly two years. April PMI was reported at 49.2 while May fell to 48.7. A number below 50 is considered a contraction. Spending on construction projects also fell for a second month in April on declines in non-residential activity. The high-interest rate environment appears to be slowing growth as planned. Tomorrow’s EIA data could shape the short-term demand picture as it will include data from the Memorial Day holiday weekend. Natural gas futures are trading lower this morning as the facilities in both Europe and Australia that closed and caused supply concerns should both be operational by Friday. Indicative Conway swap prices for the fall/winter 24/25 season appear to have hit a recent low this morning as propane has followed crude lower the last few days. Although propane has followed crude lower, propane as a % of crude has strengthened over the past few weeks.
Crude
- The U.S. purchased 3 million barrels of oil for the Strategic Petroleum Reserve at an average price of $77.69 per barrel for delivery in November. (Reuters)
- The DOE said it has purchased back 38.6 million barrels in total since selling 180 million barrels in 2022.
- U.S. crude exports from the Gulf Coast rebounded in Mary from a 2024 low as shipments to Asia rose 25% month-over-month. (GS)
- Exports of Canadian oil fell to 2.5 million bpd from 6 million bpd in April with the start of the Trans Mountain Pipeline. (BBG)
- Lead-month Brent and WTI futures are both trading at their lowest level since February 5.
- As of 8:45 am CST: Brent crude oil down $1.08 to $77.28, US dollar index up $0.122 to 104.200 while the nearby e-mini S&P 500 futures contract is down 13.00 to 5284.25.
Diesel
- National average retail diesel prices are $3.847, a 15-cent reduction over the last month. (AAA)
- Fresh new 12-month low for lead month diesel futures this morning, the lowest level since June 1, 2023.
- Heat crack spread hovering around the lowest level since January 2022.
Gasoline
- National average retail gasoline prices are $3.518, a 14-cent reduction over the last month. (AAA)
- Fresh new 3-month low for lead month gasoline futures this morning, the lowest level since February 29.
- Gasoline crack spread hovering near the lowest level since March 1 blend change.
Propane
- Conway is trading at .6550 while Belvieu is trading at .6700.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7195.
- Conway propane is trading at 39% to WTI.
Natural Gas
- Natural gas futures hit a fresh seven-session high overnight before turning lower this morning.
- The surprise outage at the Nyhamna gas processing plant in Norway should likely end by this Friday. (BBG)
- The Gorgon LNG export facility in Australia has restarted operations after the unplanned outage yesterday. (BBG)
