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05-14-2020 Daily Market Comments

6301 Ralston Road – Arvada, CO 80002
Bryant Gimlin, Energy Risk Manager ~ Office: (303) 350-3757 Cell: (970) 590-8782
Daily Market Comments for: For Thursday, May 14, 2020

Date Crude Oil Diesel RBOB Natural Gas
05/07/2020 $23.55 M20 $0.8371 M20 $0.9314 M20 $1.8940 M20
05/08/2020 $24.74 M20 $0.8993 M20 $0.9522 M20 $1.8230 M20
05/11/2020 $24.14 M20 $0.8687 M20 $0.9242 M20 $1.8260 M20
05/12/2020 $25.78 M20 $0.8384 M20 $0.9185 M20 $1.7200 M20
05/13/2020 $25.29 M20 $0.8314 M20 $0.8527 M20 $1.6160 M20

In the News: It was said that traders would be able to “spin” DOE stock data to make a case for either direction; and that’s what they did, because there was a lot of “surprise bullish” and energy futures settled lower. The first surprise was the 0.7-million barrel draw in Crude Oil stocks versus estimates for a 4.4-mmb build. There was a 1.9-million build in the SPR, however. Stocks at the NYMEX delivery hub Cushing declined 3.0-million barrels. Total Crude Oil stocks are about 11% above the five-year average. The second surprise was Refinery Utilization dropping 2.6% to 67.9% of capacity; Gasoline production was up a bit; Distillate production was lower by a similar amount. Expectations were for an increase of 0.7%. Gasoline stocks declined for a third-straight week, yet they are about 9% above the 5-year average; (not a huge cushion). Distillate stocks decreased what was expected and are about 16% above the five-year average. Both Bulls and Bears have a case on the demand side. Over the four most recent weeks averaged compared to the same period last year; Total Petroleum Supplied was 15.5-mbpd, down 22.8%; Gasoline was 6.3-mbpd, down 33.0%; Distillate was 3.3-mbpd, down 17.3%; Jet was down 68.5%. Weekly demand showed Gasoline up 0.734-mbpd to 7.398-mbpd; Distillate up 0.689-mbpd to 3.818-mbpd. The combined surplus of Crude Oil, Gasoline and Distillate stocks decreased to 116.8-million barrels from 121.8-million barrels last week. Weekly inventory data are summarized below.
DOE Inventory Report Summary - Week Ending - 5/8/2020
In millions of barrels Total Stocks Change Production
This Week Last Week Last Week Last Year This Week Change
Crude Oil 531.5 532.2 (0.7) 59.5 12.4 (0.59)
Distillate 155.0 151.5 3.5 29.4 4.9 (0.19)
Gasoline 252.9 256.4 (3.5) 27.9 7.5 0.79
% Op 67.9% -2.6%
Crude Oil Stocks Distillate Stocks Gasoline Stocks
Change This Week Change This Week Change
Padd I (East Coast) 13.2 1.1 52.1 3.3 71.0 0.2
Padd II (Midwest) 153.3 (3.3) 34.1 1.8 54.8 (1.6)
Padd III (Gulf) 282.5 (0.1) 50.5 (1.1) 88.3 (1.2)
Padd IV (Rockies) 24.2 (0.5) 4.3 0.3 8.0 (0.4)
Padd V (West Coast) 58.2 2.1 14.0 (0.8) 30.8 (0.4)
Total 531.4 (0.7) 155.0 3.5 252.9 (3.5)
Products: Usually some of the most volatile basis movement comes on the same day as DOE data, but yesterday movement in the Group and Chicago was subdued. Group Gasoline ended $0.0025 higher to -$0.1025; Group Diesel basis ended $0.0025 lower to -$0.0550. Chicago Gasoline ended $0.0050 lower to -$0.1350; Chicago Diesel ended unchanged at -$0.1100.
Refiners across the country are cut back to roughly 67.9% of capacity yet demand is only down 23%. Gasoline and Diesel demand is coming back at a faster rate than production. Refiners in the Rockies report production will remain anywhere from 45% to 60% of capacity since they are having problems sourcing Crude Oil. There is a large carry in the market, (nearby months cheaper than deferred months), which pays producers to hold inventory. As long as they have cheap storage, producers know the market is paying them to hold inventory and sell later. Denver Gasoline basis is up 25-cents in the past two weeks (35-cents in the past 30-days) and supply is extremely tight. If the problem is the switch to 7.8# RVP they aren’t saying. Diesel is tight, but not as short as Gasoline.
It's probably no wonder Refinery Utilization slipped 2.6% as NYMEX implied refinery margins just can’t find any traction lately. Yesterday the June Gasoline Crack ended $2.27/bbl lower to $10.52/bbl; the June Diesel Crack ended $0.20/bbl higher to $9.63/bbl.

Overnight: Energy futures have recovered yesterday’s losses and more already this morning on the overnight electronic session As of 06:05 in the spot months; (Jun) WTI Crude Oil is $0.62 higher to $25.91; (Jul) Brent Crude Oil is $0.60 higher to $29.79; (Jun) Diesel is $0.0125 higher to $0.8439; (Jun) RBOB is $0.0158 higher to $0.8885 (Jun) Natural Gas is up 23 to $1.6390

Short Term: Yesterday traders ignored (relatively) bullish aspects of weekly inventory data following comments by Federal Reserve Chairman Powell suggesting the economy will be a long time coming back from COVID-19. This morning however, focus is on International Energy Agency predictions. The Paris-based IEA increased its estimates for global oil demand in the 2nd quarter by 3.2-mbpd. They said 2020 demand will be down 9.07-mbpd, but production will be down 12.0-mbpd. If that were true, global inventory would decrease nearly 4.0-mbpd. The forecast is just enough to resume the bullish sentiment. And a little bullish sentiment will allow traders to “spin” yesterday’s fundamental data in a bullish direction. The focus will be on the draw in Crude Oil and Gasoline stocks as well as the decline in Refinery Utilization amid rising demand. End-users absolutely should be purchasing Maximum Price contracts. They have missed the low, so downside protection is even more important. The ceiling price is critical to avoid the increases that will come on supply shortages. The downside is critical in case COVID-19 remerges and it is inexpensive when you consider racks are moving in daily double-digit increments.

Natural Gas: Natural Gas futures suffered significant losses for a second straight session on a bearish EIA projection. In its quarterly report the EIA predicted Natural Gas storage will increase 2.1-tcf during the April – October injection season to a record-high 4.2-tcf. They point out production will be lower than normal especially in the Appalachian and Permian areas, but demand will decrease even more with lack of industrial usage. Ironically, they suggest prices will continue to rise on lower production numbers. (Sounds like a government report).

Propane: Cash Propane prices continued higher despite Crude Oil turning lower and relatively bearish inventory data. Conway ended $0.0075 higher to $0.4375; Mt. Belvieu ended $0.0075 higher to $0.4075. The EIA reported Propane stocks increased 2.2-million barrels last week, about twice what was expected. The year-on-year surplus declined to 4.5-million barrels yet are about 15% above the five-year average for this time of year. The build came on lower exports, which averaged 970,000-bpd over the last four weeks, down from 1.319-mbpd the same time last year. Production was down to 1.932-mbpd from 2.032-mbpd the previous week. Demand was 42,000-bpd higher than the previous week and 391,000-bpd above the same week last year. Weekly inventory data are summarized below.
EIA Weekly Propane Inventory
5/8/2020 5/1/2020 Change Year Ago Change
Padd I (East Coast) 4.9 4.1 0.8 3.6 1.4
Padd II (Midwest) 13.0 12.0 1.0 12.1 0.9
Padd III (Gulf) 41.4 41.1 0.3 39.8 1.7
Padd IV & V (Rockies) 2.3 2.2 0.1 1.7 0.6
Total 61.6 59.4 2.2 57.1 4.5
Demand (mbpd) 0.868 0.826 0.042 0.477 0.391

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Last Updated on Thursday, 14 May 2020 14:57

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Unconfirmed reports say OPEC has agreed to cut production by 1.2-million barrels per day to 32.5 million barrels per day.   Additionally, non-OPEC Russia has agreed to cut production to 0.2-millionm barrels per day.  The news has sent Crude Oil more than $3.00/bbl higher and Refined Products are up more than 8-cents per gallon.  The “official” statement from OPEC will be later today.

Last Updated on Wednesday, 30 November 2016 08:27

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