Outlook: Energies have been volatile this morning and have traded in both positive and negative territory. WTI crude and diesel futures are still in overbought territory after the strong move to the upside in June, while gasoline futures prices continue to lag. There is continued optimism that summer product demand will cause global oil inventories to plunge this summer and keep prices elevated. Geopolitical tensions are also boosting prices as Ukrainian long-range drones are targeting Russian oil refineries. The U.S. dollar is lower this morning but has moved 2% higher over the past few weeks, helping cap prices. Hedge Funds and money managers purchased the equivalent of 69 million barrels of Brent futures and options over the seven days ending June 18 (JKempEnergy). It was the fourth-largest weekly purchase dating back to 2013 as money managers continued to add length to oil. After the latest purchase, the net position was 140 million barrels, which is in the 15th percentile dating back to 2013. Funds are becoming more bullish than prior weeks when they sold 289 million barrels between April 16 and June 4.
European Union (EU) countries adopted their 14th package of sanctions against Russia on Monday, targeting LNG for the first time. This round of sanctions is targeting Russian exports of LNG, by banning EU ports from reselling Russian LNG after it arrives and blocking financing for Russia’s planned Arctic and Baltic LNG terminals.
Crude
- In reference to the Brent managed money data above, net length increased by 74k lots, driven by a decrease in short positions of 32.7K lots, and an increase of 41.3K long positions.
- Net positions of NYMEX products will be released today due to last week’s Federal Holiday, which is why only Brent data was available this morning.
- The US and UK both confirmed that Houthi militants damaged a bulk cargo carrier in the Red Sea this morning.
- The U.S. Rig Count decreased by 2 to 588 (lowest since Jan 22), with oil rigs down 3 to 485 and miscellaneous rigs up 1 to 5.
- Prompt month Brent/WTI premium hovering around $4.50.
- Prompt Brent spread backwardation of 85 cents is the deepest inversion since early April.
- 12-month WTI spread backwardated $6.40.
- Prompt WTI spread backwardated 75 cents.
- Early EIA indications call for a crude stock draw of 4 million barrels.
- As of 9:05 am CST: Brent crude oil up $0.32 to $85.56, US dollar index down $0.383 to 105.060 while the nearby e-mini S&P 500 futures contract is up 17.50 at 5551.75.
Diesel
- Diesel futures in contango through the November contract, but backwardated 2 cents for 12-month spread.
- Heat crack spread hovering just below $24.
- Distillate demand 1% above the five-year seasonal average.
Gasoline
- Gasoline futures backwardated 14 cents for 12-month spread.
- Gasoline crack spread hovering just above $24.
- Gasoline demand 4% above the five-year season average and at the top of the five-year range.
Propane
- Conway is trading at .7600 while Belvieu is trading at .7900.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.8025.
- Conway propane is trading at 39% to WTI.
Natural Gas
- The EIA reported a natural gas injection of 71 Bcf to storage for the week ended June 14.
- Total working gas inventories increased to 3,045 Bcf, which is 343 Bcf higher than last year and 561 Bcf higher than the five-year seasonal average.
- The US natural gas net rig count remained flat at 98 rigs for the week ended June 21.
Gasoline demand has been well above the five-year seasonal average since early March, but still trailing expectations. The recent jump in demand is fueling optimism that higher product demand will lead to tighter crude inventories throughout the summer.
