Outlook: The energy complex is trading higher this morning with positive U.S. economic data leading the charge. Retail sales increased 1% in July, well above forecasts of 0.3%, and weekly jobless claims fell for the week. The equity market got a huge boost on the news as the S&P 500 is trading within 3% of its all-time high. The July year-over-year CPI posting of 2.9% was the first time inflation was under 3% in almost 3.5 years, easing concerns about a recession and providing hope that a rate cut in September will boost energy demand.
Economic data reported this morning out of China is limiting market upside. Crude demand remains weak as oil processing volume and net import of refined oil fell 8% year-over-year in July to 13.55 million bpd and refinery output slowed for a fourth straight month. Industrial production and fixed asset investment both rose less than expected, unemployment ticked higher, and the real estate market continues to get slaughtered. China has struggled with weather this year as record flooding and heat waves have hit the country, leading to fuel demand destruction. With the current state of the economy, crude and fuel demand is expected to remain hampered for the remainder of the year and potentially into next year.
Propane prices for this fall/winter and fall/winter 25/26 have remained at favorable levels as domestic inventory is 14% above the five-year seasonal average, and only trailing last year by 539,000 barrels. Last year’s inventory peaked at 102.4 million barrels, the second-highest build ever. Inventory levels surpassed the 90-million-barrel threshold this week, with eight to ten weeks remaining in the build season. Now would be a great time to top off your tanks or finish up contracting needs for this fall as propane prices historically increase heading into harvest.
Crude
- Despite yesterday’s crude build, crude inventory at Cushing fell to its lowest level since early February.
- India imported $2.8 billion of Russian crude oil in July, with imports increasing from less than 1% of crude imports pre-Ukraine to almost 40%. (GS)
- Some geopolitical risk premium was injected back into the market this morning as investors await retaliation from Iran.
- Yesterday’s larger-than-expected stock draws for both gasoline and diesel should be supportive for crack spreads.
- As of 9:25 am CST: Brent crude oil up $1.02 to $80.78, US dollar index up $0.480 to 102.865 while the nearby e-mini S&P 500 futures contract is up 63.00 at 5540.00.
Diesel
- Midwest distillate stocks fell below the five-year seasonal average for the first time this year as Midwest refinery utilization is unseasonably low.
- Midwest distillate stocks are 3% below the five-year seasonal average.
- Global jet fuel demand averaged 7.5 million bpd this year through July, a 500K bpd increase over the same period last year. (GS)
- U.S. airlines and travel companies are concerned that consumer spending on leisure travel is slowing, which may weigh on fuel demand in the second half of the year. (Reuters)
Gasoline
- Midwest gasoline stocks are 3% or 1.4 million barrels below the five-year seasonal average.
- Gasoline prices remain weak and are currently being capped by the 100-day moving average.
- U.S. gasoline demand last week was less than 1% below the five-year seasonal average.
Propane
- Conway is trading at .7450 while Belvieu is trading at .7725.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7797.
- Conway propane is trading at 40% to WTI.
Natural Gas
- The EIA is expected to report a 3 Bcf injection into storage for the week ended August 9, which would be much smaller than the 43 Bcf historical five-year average for this week.
- U.S. natural gas storage is currently 14% above the five-year historical average.
- Lead month natural gas futures are trading near a one-month high, approaching resistance at the 100-day moving average.
Conway propane forward curve showing lower values today compared to the prior two months
