CHS Hedging will be closed on Monday in observance of the Memorial Day holiday.
Energy markets trade from Sunday at 5:00 pm CT through Monday at 1:30 pm CT with a halt, then resume Monday evening at 5:00 pm CT.
If a need arises, please email energy@chshedging.com and we will connect as soon as we are able.
Outlook: The energy complex is trading sharply lower this morning after being up in early morning trade. OPEC+ is meeting this weekend to determine if they will move forward with unwinding their production cuts in October, and according to six OPEC+ sources, they are proceeding with the plan. Crude prices shed $1.80 in just a few minutes this morning when the news was released. Crude prices are down more than product prices this morning, which makes sense with crack spreads still abnormally weak. $72 has been quite a level of support for WTI crude so if prices fall below that level there could be additional movement to the downside.
Reuters released a new poll of 37 analysts surveyed over the last two weeks. The analysts lowered their price outlook for Brent and WTI citing weak fuel demand from leading importer China, and rising inventory levels as OPEC+ is slated to unwind production cuts in October. The forecast moved the average Brent crude price for 2024 down to $82.86 per barrel, a fourth straight cut in estimates and 80 cents below the July price of $83.66. WTI is not expected to average $78.82 this year, 40 cents below last month’s estimate of $79.22. Analysts also trimmed their global demand growth estimates from 1 to 1.5 million bpd at the last poll to 1 to 1.3 million this time around. This comes on the heels of Goldman Sachs adjusting their Brent forecast down this year to $77, and Morgan Stanley moving estimates down to $75-$78.
Propane prices remain very appealing with Conway spot month prices almost 9 cents below the five-year seasonal average and the December contract almost 4 cents below the five-year seasonal average. It remains a great time to fill tanks heading into fall or contract winter needs.
Crude
- Iraq is planning to reduce crude output to between 3.85 and 3.9 million bpd in September, after producing 4.25 million bpd in July, above their OPEC quota.
- Iraq also canceled a spot cargo of 1 million barrels in August to reduce exports this month.
- The 2:1:1 crack spread remains very weak at $18 but has bounced almost $2 from an almost four-year low.
- September is the most active month for hurricanes with the peak occurring right around September 10. There are currently two disturbances being watched in the Atlantic that could form into hurricanes by next week.
- Exxon Mobil is reportedly looking to sell $1 billion worth of non-core assets in the Permian Basin to focus on higher-growth assets.
- As of 9:00 am CST: Brent crude oil down $1.20 to $78.74, US dollar index up $0.235 to 101.505 while the nearby e-mini S&P 500 futures contract is up 35.00 at 5645.00.
Diesel
- Lead month diesel futures are 22 cents below the five-year seasonal average.
- The diesel crack spread is sitting at $22.50, up nearly $2.50 from almost four-year lows.
- U.S. diesel demand is 2% below the five-year seasonal average, where it has been most of the year.
Gasoline
- Lead month gasoline futures are equal to the five-year seasonal average.
- The gasoline crack is hovering right around $14 but has rebounded nearly $2 from almost three-year lows.
- U.S. gasoline demand is 2% above the five-year seasonal average but still lagging expectations.
Propane
- Conway is trading at .7450 while Belvieu is trading at .7775.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7885.
- Conway propane is trading at 41% to WTI.
Natural Gas
- The natural gas injection last week was 35 Bcf, slightly lower than the Platts projection of 36 Bcf but above the Goldman Sachs estimate of 28 Bcf.
- Total working natural gas inventories are 9% above the five-year seasonal average and near the top of the range.
- Freeport LNG appeared to resume partial production yesterday as the facility worked to return to normal operations after an unplanned outage earlier in the week. (GS)
