Outlook: Energies are finding mild pressure this morning on the back of a higher US dollar and record flows being reported from Kazakhstan. Despite the Ukrainian drone strike on the CPC pipeline which knocked off over 300,000 bpd of flows, Kazakhstan produced a record 2.12 mbpd of crude this week. Oil prices have traded in a $3.50 range over the last 2 weeks and there doesn’t appear to be a driver lurking to disrupt that range near-term. Tariff discussions between Canada and Mexico should come back around after being delayed a month but given the door was open for the first delay, another delay could very easily settle in as the expectation. Diesel futures are also on track for a weekly gain despite leading the complex lower this morning. Group 3 basis has plummeted this week, falling to 5-year lows, which may be contributing to lower cash prices despite higher futures. Be conscious of your local rack basis and its relationship to the regional benchmark you are within. Heavy basis discounts can be brought into storage and hedged off by selling futures as a strategy to capture basis appreciation before demand season.
Crude
- Kazakhstan has pumped record-high oil volumes despite damage to its CPC pipeline which exports oil via Russia. (Reuters)
- Continuous WTI has met resistance at its 50 DMA for three consecutive sessions. The contract has also found support consistently at its 9 DMA.
- WTI’s second-month volatility fell to its lowest level since July yesterday.
- The EIA reported crude stocks rose 4.6 million barrels last week.
- Cushing stocks rose 1.5 million barrels last week, which was the largest weekly increase since May of last year.
- Refinery run rates remain on par with 5-year average levels at ~85% utilization but rates could fall further as maintenance ramps up through next month.
- As of 8:04 am CST: Brent crude oil down $0.35 to $76.13, US dollar index down $0.252 to 106.624 while the nearby e-mini S&P 500 futures contract up 3.25 to 6140.00.
Diesel
- The EIA reported diesel stocks fell 2 million barrels last week vs -3.5 mb est.
- 4-week average diesel demand rose 1.5% last week and is 280,000 bpd above the 5-year average level.
- Group 3 basis -6.50 to -35.50c.
- Chicago diesel basis +0.00 to -23.00c.
Gasoline
- The EIA reported gasoline stocks fell 150,000 barrels last week vs +800 kb est.
- 4-week average gasoline demand rose 0.5% last week and sits 70,000 bpd below 5-year average levels.
- March-April spread trading around -23.50 today.
Propane
- Prompt Conway futures are indicated at .9250 while Belvieu is trading at .9050.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.8425.
- Jun25 propane swap midpoint indication: 79.00
- Conway propane is trading at 54% to WTI.
- The EIA reported propane stocks fell 3.5 million barrels last week vs -3.2 mb est.
Natural Gas
- Overnight weather runs removed 4.5 HDDs through the two-week forecast.
- The EIA reported nat gas stocks fell 196 Bcf last week which exceeded the average industry estimate.
- Dutch TTF is near unchanged today but on track to finish the week down 6%
Midwest Diesel Stocks: Diesel stocks in the Midwest remain ample sitting at 5-year highs. A supply surplus can contribute to lower basis levels which appears to be the case this week.
