Outlook: Energies are higher this morning and strengthened when Producer Price Index (PPI) data came in lower than expected for year-over-year and month-over-month PPI and Core CPI. The report showed that inflation is moving in the right direction and expectations for a September interest rate cut continue to gain traction, which is bullish for energy prices. Yesterday’s surprise crude stock build, the first crude production increase in 13 weeks, and a huge crude import increase of 18% from the prior week is capping prices this morning. Adequate diesel inventory in the Midwest has diesel rack basis values at the weakest level since February, and well below the five-year season average. Pair that with contango through the November HO contract and it remains an excellent time to fill your diesel storage tanks. Fall/Winter propane prices have firmed significantly over the last few trading sessions on higher crude prices and a very small inventory build last week compared to historicals. The average build for week 23 over the past five years has been 2.4 million barrels, well above this week’s posting of 978K barrels. Natural gas prices are trading lower this morning but remain extremely volatile as global supply disruptions and hotter-than-average global temperatures have driven prices to the highest level since January.
Crude
- YoY PPI 2.2%, (Est 2.5%) | MoM PPI -0.2%, (Est 0.1%)
- YoY PPI Core 2.3%, (Est 2.4%) | MoM PPI Core 0.0%, (Est. 0.3%)
- Federal Reserve officials signaled they expect to cut their benchmark interest rate just once this year, after they were expecting 3 rate cuts this year in March.
- Goldman Sachs latest forecast has Brent crude rising to $86 per barrel due to solid summer demand and kept a firm price range forecast between $75 and $90 per barrel.
- Citi analysts forecast a 0–3-month price forecast for Brent of $82 before a price decline to $60 per barrel by 2025 due to a surplus in the global oil market.
- U.S. crude production rose 100K bpd to 13.2 million bpd, the first increase since February.
- U.S. refinery runs fell modestly but remained near the highest level since December 2019.
- U.S. refinery utilization fell slightly to 95% but remains near the highest level since June 2023.
- U.S. crude imports of 8.3 million bpd is the highest import number since August 2018.
- Houthi attacks are still causing a 70% reduction in traffic through the Red Sea. (BBG)
- The 3:2:1 Crack spread remains very weak at 23.
- As of 8:30 am CST: Brent crude oil up $0.34 to $82.94, US dollar index up $0.210 to 104.825 while the nearby e-mini S&P 500 futures contract is up 10.00 at 5437.50.
Diesel
- Diesel demand increased 8% from the prior week and is 4% below the five-year seasonal average.
- U.S. distillate stocks are 7% below the five-year seasonal average.
- Midwest distillate stocks are 8% above the five-year seasonal average.
Gasoline
- Gasoline demand increased 1% from the prior week and is 3% above the five-year seasonal average.
- U.S. gasoline stocks are less than 1% below the five-year seasonal average.
- Midwest gasoline stocks are 2.5% below the five-year seasonal average.
Propane
- Conway is trading at .7525 while Belvieu is trading at .7725.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7926.
- Conway propane is trading at 39% to WTI.
Natural Gas
- German energy company Uniper terminated its Russian gas supply contract yesterday increasing supply concerns about natural gas flows from Russia to Europe.
- European officials are currently discussing plans to keep natural gas flowing through a key Russia-Ukraine pipeline, and Ukraine favors it. (BBG)
- Natural gas futures trading near their highest level since mid-January.
Propane rack prices have strengthened significantly with Conway up 13% and Mt. Belvieu up 16% from the most recent lows on June 3:
