Outlook: The energy complex is looking for direction this morning following the sharp reversal lower yesterday. The EIA report proved to be bullish with prices moving higher immediately after release. A significant draw in crude and diesel stocks was the headliner. Cushing stocks also fell to their lowest level in 6 months while diesel exports hit record levels to offset lackluster domestic demand. Propane stocks went against the grain seeing a larger-than-expected build which allowed values to soften with the rest of the complex. The post-report bid was short-lived with the US Bureau of Labor Statistics revising March jobs lower by the largest clip since 2009. A large revision lower was expected, however, the market may be pricing in future lower revisions which would paint the US labor market in worse condition than originally stated. On the other hand, the data further supports the cutting of interest rates with a 25 basis point cut in September nearly cemented in. The Jackson Hole Economic Symposium starts today with Fed Chair Jerome Powell expected to speak tomorrow to provide further insight.
Crude
- Canada’s two largest railroads stopped operation this morning after a deal failed to be reached.
- Iraq and Kazakhstan pledged to cut output by 139,000 bpd due to overproduction relative to OPEC quotas. (BBG)
- The EIA reported crude stocks fell 4.6 million barrels last week (-2.7mb est).
- Cushing inventories fell 560,000 barrels to a 6.5 month low last week.
- Refinery utilization rates rose 0.8% to 92.3% last week.
- The US jobs report for March saw its largest revision lower since 2009 yesterday.
- The FOMC minutes showed confidence in a 25 bp cut in September.
- The Fed’s Jackson Hole economic symposium will start today and Fed Chair Jerome Powell is expected to speak tomorrow.
- As of 8:00 am CST: Brent crude oil up $0.45 to $76.50, US dollar index up $0.263 to 101.302 while the nearby e-mini S&P 500 futures contract is up 12.25 to 5653.00.
Diesel
- The EIA reported diesel stocks fell 3.3 million barrels last week vs -0.2mb est.
- US diesel exports rose 313,000 bpd last week to a record level 1.853 mbpd.
Gasoline
- The EIA reported gasoline stocks fell 1.6 million barrels last week vs -0.9mb est.
- US gasoline demand rose 148,000 bpd to 9.193 mpbd last week, however, 4-week average gasoline demand declined.
Propane
- Conway is trading at .7325 while Belvieu is trading at .7575.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7775.
- Conway Swap Oct24 indicative midpoint ~.7600
- Conway propane is trading at 42% to WTI.
- The EIA reported propane stocks propane stocks rose 1.9 million barrels last week vs +1.8 mb est.
- Propane prices may find gradual support with every day the rail strike remains in place.
Natural Gas
- Overnight weather runs removed 2 CDDs for the two-week forecast.
- Reuters estimates nat gas stocks rose between 22 and 41 Bcf last week.
- Waha hub gas prices in the Permian set a record yesterday after closing in negative territory for the 26th consecutive day.
- Asia LNG prices have hit 8-month highs.
October Conway Propane Seasonality: Propane values remain below 5-year average levels with seasonal patterns suggesting higher prices.
