Outlook: Energies remain lower across the board this morning with the bearish weekly trend remaining intact despite the technical bounce yesterday. The first look at Q2 GDP reflected stronger-than-expected economic growth which helped lift energies briefly off its daily lows. The growth was accompanied by a higher-than-expected quarterly PCE reading which may neutralize some of the optimism. The monthly PCE reading is due out tomorrow morning and will garner more focus with a potential Fed rate cut projected right around the corner in September. A hot reading tomorrow could certainly cement a strong bearish finish for the week. OPEC’s compensation plan released yesterday may also be creating a headwind with cuts addressing overproduction not expected to be in place until 2025. Over 2.2 mbpd of oil was produced in the first half of the year which was not supposed to be there under OPEC’s guidelines. The deferred adjustment to next year also gives producers time for market conditions to change which could be a bailout if the cuts then appear unnecessary.
Crude
- OPEC released its compensation plans for Iraq, Russia, and Kazakhstan, who have all overproduced beyond their quotas this year. Overproduction totaled 2.28 mbpd from the three.
- Iraq will cut 1.2 mbpd of overproduction from Jan-Jun 2025.
- Russia will cut 440,000 bpd of overproduction in March-Sep 2025.
- The EIA reported crude stocks fell 3.7 million barrels last week.
- Crude input to refiners fell 521,000 bpd last week.
- US monthly PCE will be reported tomorrow morning. This is the Fed’s preferred measure of inflation.
- US Q2 GDP was reported at 2.8% vs 2.0% est.
- US q/q Q2 PCE was reported at 2.9% vs 2.7% est.
- As of 7:54 am CST: Brent crude oil down $1.07 to $80.62, US dollar index down $0.058 to 104.333 while the nearby e-mini S&P 500 futures contract is up 3.25 to 5475.00.
Diesel
- The EIA reported diesel stocks fell 2.7 million barrels last week.
- US diesel demand rose 7.7% last week to 3.8 mbpd.
- Russian Deputy Prime Minister Alexander Novak said there is no plan to ban diesel exports.
Gasoline
- The EIA reported gasoline stocks fell 5.5 million barrels last week.
- The larger-than-expected draw flipped gasoline stocks back to a deficit to 5-year average levels.
- US gasoline demand rose 7.7% to 9.4 mbpd last week, which marked the highest seasonal level since 2021.
Propane
- Conway is trading at .7475 while Belvieu is trading at .7775.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7825.
- Conway Swap Oct24 indicative midpoint ~.7725
- Conway propane is trading at 40% to WTI.
- The EIA reported propane stocks rose 1.8 million barrels last week with Gulf stocks rising over 2 million barrels.
Natural Gas
- Overnight weather runs removed 2 CDDs for the two-week forecast.
- August temperatures are expected to rise above the 10-year average.
- Freeport LNG is expected to resume full operation in August.
- Reuters estimates nat gas stocks rose between 11 and 24 Bcf last week.
Continuous Daily HO: Diesel failed to conquer its 9-day moving average yesterday and the weekly bearish trending resumes today. $2.4118 was the lowest close throughout May which trading in a tight range. This will be a level to watch along with $2.40 as psychological support.
