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07-06-2022 Daily Market Comments

Bryant Gimlin, Energy Risk Manager ~ Office: (303) 350-3757 Cell: (970) 590-8782

Daily Market Comments for: For Wednesday, July 06, 2022

Date

Crude Oil

Diesel

RBOB

Natural Gas

06/28/2022

$111.76 Q22

$4.1994 N22

$3.9351 N22

$6.5510 N22

06/29/2022

$109.78 Q22

$4.0367 N22

$3.8270 N22

$6.4980 Q22

06/30/2022

$105.76 Q22

$3.8982 N22

$3.6498 N22

$5.4240 Q22

07/01/2022

$108.43 Q22

$3.9389 Q22

$3.6878 Q22

$5.7300 Q22

07/05/2022

$99.50 Q22

$3.6016 Q22

$3.3290 Q22

$5.5230 Q22

In the News: And we thought last week was volatile! Traders came back from the holiday weekend with a selling frenzy, pulling Crude Oil $8.93/bbl lower and Refined Products lost even more than that. It was all about the dismal outlook on the U.S. economy. The DOW recovered late from large intra-day losses to end 129 lower at 30,968 but the U.S. Dollar surged 1.35% to a 20-year high. (A higher Dollar shakes foreign investment out of dollar-denominated Crude Oil). It isn’t just the U.S. economy suffering, rather the global economy. China expressed the same concerns as seen in the U.S. with a video conference with U.S. Treasury Secretary Yellen. Citibank forecast Crude Oil hitting $65/bbl this year as the recession takes hold, $85.00/bbl if it doesn’t. They said Russian production will remain robust as sanctions are not widespread enough to impact their ability to sell. A barrage of bearish economic data offset news of more lost global production as a Norwegian oil workers’ strike began yesterday, adding to problems seen in Nigeria, Libya, and other OPEC nations. Not sure if it’s time to call it bearish however as global fundamentals in general and U.S. fundamentals specifically remain bullish. This week’s inventory data will be key in determining if higher prices and/or a weak economy is leading to lower demand.

Products: Basis values were mixed as physical traders were perplexed about what was going on with the NYMEX selloff. Generally, values held relatively stable to higher indicating short supply is real. Group Gasoline basis ended $0.0625 lower to +$0.0200; Group Diesel basis settled $0.0300 higher to +$0.1900. Chicago Gasoline basis ended $0.0500 lower +$0.000; Chicago Diesel ended $0.0100 higher to +$0.0300.

NYMEX implied refiner margins took a huge, (much needed), hit as Refined Products sold off even more than the $8.93/bbl in Crude Oil. The August Gasoline Crack ended $6.14/bbl lower to $40.32/bbl; the August Diesel Crack ended $5.24/bbl lower to $51.77/bbl.

Overnight: Energy prices are mostly higher this morning on the overnight electronic session as supply concerns return.   As of 05:00 in the spot months; (Aug) WTI Crude Oil is $0.41 higher to $99.91; (Sep) Brent Crude Oil is $0.99 higher to $103.76; (Aug) Diesel $0.0197 lower to $3.5819; (Aug) RBOB $0.0175 higher to $3.3465; (Aug) Natural Gas is up 78 to $5.5990.

Short Term: Energy prices look to rebound today after the bloodbath see on Tuesday. There is headwind, however, as the Dollar continues to move higher on recession fears, COVID concerns have reemerged in China, the DOW is called to open sharply lower and the technical indicators, (computer trading), will be seeing “sell” signals.   Yet it is too early to throw in the towel. The complex is not yet bearish because of global fundamentals. At the end of the day, supply and demand still rule any commodity. Inventory data is delayed one day because of the holiday but will be an important report when seen tomorrow. At key issue will be the demand numbers. Not only will they prove is there is real demand destruction due to high prices, but also give indication of whether or not actual recession has started.

End users should use this dip to get covered with Maximum Price contracts to ensure supply, take price “spikes” out of the equation, and still take advantage of market dips, even if short lived.

Natural Gas: NYMEX Natural Gas futures fell lower with the rest of the complex on Tuesday. Last week the EIA said previous week injection was 82-bcf for the week ending June 24th, placing total stocks at 2.251-tcf. The year-on-year deficit was reduced to 296-bcf from 305-bcf in the previous report. The deficit to the five-year average decreased to 322-bcf from 331-bcf the previous week. Traders are still waiting to see data on increased exports to Europe.

Propane: Cash Propane prices were pressured lower because of a massive move lower in the rest of the complex. Conway ended $0.0700 lower to $1.1000; Mt Belvieu ended $0.0525 lower to $1.1675. We’ll see later today if there was any effect on the forward curve as it could be an opportunity to book winter volume. Last week the EIA said Propane stocks were unchanged to the previous week as a build at Conway offset a draw at the Gulf Coast. Consequently, the year-on-year deficit increased to 3.5 million barrels and total stocks are 16% below the five-year average. Exports are robust at 1.294-mbpd, while production has slipped to 2.341-mbpd. Weekly demand also indicates marketers are beginning summer-fill early to take advantage of relatively low spot prices.  

“The risk of loss trading futures can be substantial. Each investor must consider whether this is a suitable investment. This report is for informational purposes only and is not to be construed as an offer to sell or a solicitation to buy the commodities or securities herein named. The information in this report has been obtained from sources believed to be dependable but is not necessarily all-inclusive and is not guaranteed as to its accuracy. Unless otherwise stated any quotes provided by Hill Petroleum does not include commissions or bid/ask spreads. Any opinions expressed in this report are those of the author. Individual employees of Hill Petroleum may express different or contrary opinions. The above recommendations may or may not be followed by Hill Petroleum or its employees."

Last Updated on Wednesday, 06 July 2022 07:14

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