Outlook: Energies are mixed this morning with crude and diesel trading higher and gasoline trading lower. Crude prices are hovering around 4-month lows while diesel remains near 1-year lows. I don’t think OPEC was expecting the market to react as negatively as it did after their supply cut announcement on Sunday. The Saudi Arabian energy minister has since stated OPEC+ would pause the unwinding of the cuts or reverse them if demand wasn’t strong enough to absorb the barrels. OPEC’s next meeting is not until December so it will be interesting to see if they make any surprise announcements before then if energy prices remain weak. Prices also received some support this morning as The Labor Department’s Jobs Openings and Labor Turnover Survey (JOLTS) reported U.S. jobs openings fell more than expected in April. Job openings were down 296,000 to 8.059 million on the last day of April, the lowest level since February 2021. This would help strengthen the case that the Fed’s interest rate hikes are working and make the case for rate cuts. Markets turned lower yesterday afternoon after the API data was released. The main surprise was the build in crude stocks as refinery efficiency well above the season 5-year average should be drawing on crude inventory. Natural gas futures are trading higher this morning on global warmer weather patterns, and dwindling gas reserves in South America (see below). Propane inventory is currently 15% above the 5-year average and the average five-year build for week 22 is 2.4 million barrels. The fall/winter 24/25 Conway propane price remains at the weakest level in several weeks.
Crude
- According to sources citing the API, crude inventory rose 4 million barrels.
- Reuters poll expected a crude draw of 2.3 million barrels.
- Reuters poll projected a refinery utilization increase of 0.4%.
- Russia’s four-week average crude exports fell for a fourth week, with shipments reaching the lowest level since mid-February. Russia had pledged to compensate for overproduction in the month of April. (GS)
- The European Central Bank is expected to cut interest rates tomorrow for the first time since 2019.
- Brent-WTI crude spread hovering around $4.30 this morning.
- WTI prompt spread backwardated around 20 cents.
- S&P 500 is trading higher for the fourth straight day on JOLTS data.
- As of 8:45 am CST: Brent crude oil up $0.40 to $77.92, US dollar index up $0.054 to 104.105 while the nearby e-mini S&P 500 futures contract is up 16.00 to 5320.00.
Diesel
- According to sources citing the API, diesel inventory rose 1.9 million barrels.
- Reuters poll expected a diesel build of 2.5 million barrels.
- Heat crack spread hovering around the lowest level since January 2022.
Gasoline
- According to sources citing the API, gasoline inventories rose 4 million barrels.
- Reuters poll expected a gasoline build of 1.9 million barrels.
- Fresh new 3-month low for lead month gasoline futures this morning, the lowest level since February 29.
Propane
- Conway is trading at .6650 while Belvieu is trading at .6750.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7180.
- Conway propane is trading at 38% to WTI.
Natural Gas
- Natural gas futures are trading just above the 9-day moving average and have consolidated between the $2.60-$2.80 range.
- Egypt expects to import around 20 LNG cargoes this summer due to extreme energy shortages that have forced power outages throughout the country. (GS)
- Columbian President Gustavo Petro has halted new licenses to explore for new gas drill sites despite falling reserves and will likely look to buy cargoes of LNG this year. Ecopetrol, the state oil company, expects a supply shortfall of 8% in 2025 and 25% in 2026. (BBG)
