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05-20-2022 Daily Market Comments

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

Daily Market Comments for: For Friday, May 20, 2022

Date

Crude Oil

Diesel

RBOB

Natural Gas

05/13/2022

$110.49 M22

$3.9212 M22

$3.9578 M22

$7.6630 M22

05/16/2022

$114.20 M22

$3.9075 M22

$4.0229 M22

$7.9560 M22

05/17/2022

$112.40 M22

$3.7993 M22

$3.9417 M22

$8.3040 M22

05/18/2022

$109.59 M22

$3.6681 M22

$3.7206 M22

$8.3680 M22

05/19/2022

$112.21 M22

$3.7920 M22

$3.8317 M22

$8.3080 M22

In the News: Unlike the DOW and Gasoline, Crude Oil and Diesel recovered nearly all of Wednesday’s losses. Gasoline recovered about half of what was lost on Wednesday, yet that was coming off all-time-record highs, so a correction lower is well justified. Gasoline backwardation widened to 15-cents in the June-July, which is worth watching since there is only a little over one week left on the June contract. Support came from technical buying of Wednesday dip, which is supported by tight U.S. fundamentals and reports that China is unwinding COVID lockdowns. As China’s economy gets back to work global supplies are expected to tighten. Also, don’t forget the Russia/Ukraine war is bullish to energy prices any way it is measured.  In the U.S. weekly demand showed Gasoline up 325,000-bpd to 9.027-mbpd; Distillate up 39,000-bpd to 3.816-mbpd. Compared to the five-year average Crude Oil stocks are 14% below; Gasoline is 8% below; Distillate is 22% below. The combined total Crude Oil, Gasoline and Distillate stock deficit to last year increased to 106.0 million barrels. Refinery Utilization was up 1.8% to 91.8% of capacity.

Products: Basis movement continues to be volatile on top of large NYMEX moves. Group Gasoline basis ended $0.0100 higher to -$0.3900; Group Diesel basis ended $0.0700 lower to -$0.0900. Chicago Gasoline basis ended $0.0800 higher to -$0.2400; Chicago Diesel ended unchanged at -$0.0500. New York Harbor Diesel basis slipped $0.4000 lower to is still at a lofty +$0.2500, ($1.00 lower in three days).

Like the underlying futures, NYMEX implied refiner margins recovered a good portion of previous day losses. The June Gasoline Crack ended $2.05/bbl higher to $48.72/bbl; the June Diesel Crack ended $2.58/bbl higher to $47.05/bbl; (Refiners are averaging about $1.15/gallon margin plus basis).

Overnight: Energy futures have extended gains this morning on the overnight electronic session on higher global equity markets. As of 05:10 in the spot months; (Jun) WTI Crude Oil is $0.24 higher to $112.45; (Jul) Brent Crude Oil is $0.49 higher to $112.51; (Jun) Diesel $0.0065 higher to $3.7985; (Jun) RBOB $0.0514 higher to $3.8831; (Jun) Natural Gas is off 49 to $7.9660.

Short Term: After Wednesday’s massive 1,165 point loss the DOW moved down another 237 points yesterday. Yet it is called to open 300 points higher this morning while the Dollar is off 20-year highs, which is giving support to the energy market. June Crude Oil expires at the end of today’s session and the July is currently $2.35/bbl lower. As said yesterday, it is too soon to call the energy market bearish because there is too much fundamental and geopolitical support. This was a short lived bear correction in a bull market at this point. And you must remember we a simply coming off record high Gasoline and Diesel prices. In addition, especially in Denver, suppliers are not following the NYMEX futures lower. In fact, it appears we are headed for the next round of shortages. Suncor implemented Diesel allocations last night, HF Sinclair has a terminal cap and is allocating Gasoline through price, DuPont is out of Diesel.

End users should continue to cover with Maximum Price contracts. Locking in a ceiling price guards against record high “spikes”. Downside protection means they are still covered when/if the market ever corrects lower. Weekly price adjustments (unique to Hill Petroleum) offer the best of both worlds.

Natural Gas: Natural Gas futures pulled back a bit on technical profit taking following better-than-expected inventory data. The EIA said previous week injection was 89-bcf, which was better than the same week last year and right on with the five-year average. Total stocks of 1.732-tcf are 358-bcf below the same week last year and 310-bcf below the five-year average. It was a decent injection considering all of the LNG cargos heading to Europe. The potential EU ban on Russian gas will continue to support the futures market for some time to come. Weekly inventory are summarized below.

Natural Gas

EIA Weekly Inventory

5/13/2022

5/6/2022

Change

Year Ago

5-Year Avg

Region

East

               296

               274

               23

               356

               363

Midwest

               364

               342

               23

               470

               441

Mountain

               103

                 96

                 7

               134

               121

Pacific

               187

               183

                 4

               245

               225

South Central

               781

               749

               32

               884

               893

Total

           1,732

             1,643

               89

             2,090

             2,042

Propane: Cash Propane prices settled lower but well off session lows as the rest of the complex recovered early losses.   Conway ended $0.0150 lower to $1.1950; Mt Belvieu ended $0.0025 lower to $1.2225. Weekly inventory disappointed a bit as expectations were for a 2.3-million-barrel build while the actual build was (only) 300,000 barrels, thanks to a 1.0 million barrel draw at the Gulf Coast. That came as exports were up 118,000-bpd above the previous week and Production was down 40,000-bpd. Domestic demand was higher than expected and 284,000-bpd above the previous week and 140,000-bpd above the same week last year. Total stocks are 100,000-above year-ago levels yet 10% below the five-year average.

“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."

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