Energy Update | Week of May 16nd

• Crude oil and gasoline prices are moderately higher today, with crude climbing to a six week high and RBOB gasoline futures hitting a new all-time near futures high.
• China is reporting that COVID imposed lock downs in Shanghai will be lifted by June 1^st.  The lockdowns have had a significant impact to Chinese demand and is boosting crude pricing today.  A phased approach is planning to start as early as May 21^st.
• The EU Russian phased in embargo is being discussed today.  Dependence in Bulgaria, Czech Republic, Hungary, and Slovakia are the biggest hurdle to getting agreement as reliance on Russian oil is significant.
• U.S. refinery utilization is near 90% and is forecasted to reach 93% in May and 95% in June.  The refinery utilization is at or above the five year average as current crack spreads are incentivizing refiners to process as much crude as possible.
• Baker Hughes reported last Friday that active U.S. oil rigs in the week ended May 13 rose by +6 rigs to a new 2-year high of 563.
• Wednesday’s large propane build was bearish for the propane markets and current inventories are now above where they were at this time of the year last year.  It will be interesting to see how the builds continue as the build season progresses as exports will be the strong variable.

Contracting Refined Fuels

As the old saying goes, “Hindsight is 20/20”.  
Recently, many customers have been asking about contracting diesel in this volatile market. Historically, the energy markets soften in the winter months; and indications leading up to this point were favorable for a pullback in prices. Unfortunately, global inventories remain low, U.S. production is slow to recover, and OPEC+ is under-producing allocations.
Our advice to our customers:

• Stay informed. Review weekly energy updates.
• Understand your risk tolerance.
• Determine what price works for your business.
• Check your inventory and assess short-term needs.

Analysts are still saying production will increase throughout 2022. Everyone’s situation is different. Understanding the above items will help make the best decision for your business. At River Valley, we are here to help navigate these difficult times. Please call your Energy Account Manager to determine what is right for you.