Due to the Wednesday market holiday, energy markets will halt early on Wednesday at 1:30 pm CT and resume trade at 5:00 pm CT. Our desk will be staffed for the entirety of the day.
Outlook: Energies are looking to maintain bullish momentum today as they hold marginal gains early in the session. Continuous WTI futures are finding technical support from a strong close yesterday, above several moving average levels. Diesel futures are again testing the 50-day moving average today which it hasn’t managed a close above since April. Both are beginning to approach overbought levels but still have a cushion that would allow for further upside. Crude spreads also saw a strong move higher yesterday and may have found support from China bringing back around 400,000 bpd of refining capacity coming out of maintenance cycles. US crude exports were soft in the previous EIA report at 3.2 mbpd and may look to rebound if the global appetite is present. OPIS is suggesting gasoline demand remained sluggish last week at levels far below 2019 which posted US demand around 9.9 mbpd during this time period. Gasoline cracks have remained soft to reinforce demand woes and are showing very little optimism down the curve. The API will report its inventory survey this afternoon, however, the EIA won’t report its data until Thursday due to the Wednesday market holiday.
Crude
- Texas, Louisiana, and Mississippi are suing the US Gov to block a proposal that would require the offshore oil and gas industry to provide nearly $7 billion to cover the costs of dismantling old infrastructure. 2,700 wells and 500 platforms are currently overdue for commissioning. (Reuters).
- Prompt WTI futures closed above its 50-, 100-, and 200-day moving averages yesterday.
- WTI may look to test resistance at the May high of $80.62.
- Backwardation in the front two WTI contracts has risen to its highest levels since April, surpassing May highs.
- Reuters estimates crude stocks fell 2.3 million barrels last week.
- The API survey will be reported at 3:30 pm CT.
- The EIA report will be delayed till Thursday due to the Wednesday market holiday.
- As of 8:44 am CST: Brent crude oil up $0.20 to $84.45, US dollar index up $0.020 to 105.340 while the nearby e-mini S&P 500 futures contract is up 7.25 to 5486.00.
Diesel
- Chinese diesel exports rose 79% y/y in May to 1.07 million tons. (BBG)
- Reuters estimates diesel stocks fell 300,000 barrels last week.
- Prompt diesel futures closed just below its 50-day moving average yesterday but is retesting again today. The 50-day sits at 2.4805.
- Aug $2.50 calls theoretical valued around 8 cents. Please reach out if you have questions on how to implement options into your hedging strategies.
Gasoline
- Gasoline demand will be closely monitored over the next few weeks leading into the 4th of July. Demand continues to lag below pre-pandemic levels which sheds bearish pressure.
- Reuters estimates gasoline stocks rose 1.5 million barrels last week.
Propane
- Conway is trading at .7475 while Belvieu is trading at .7850.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.8100.
- Conway propane is trading at 39% to WTI.
- Prompt Conway rose around 5 cents last week.
Natural Gas
- Overnight weather runs added 2 CDDs for the two-week forecast.
- Natural gas demand in the Northeast is expected to reach record levels for this time of year as a heat wave moves through.
- Reuters estimates nat gas stocks rose between 66 and 80 Bcf last week.
Crude Spreads: The prompt WTI spread has expanded to its highest levels since April, reflecting a little more fundamental support than the outright contract. Refinery stress from excessive heat this week could present downside risk any units are forced offline, decreasing demand for crude.
