Economic Worries, Gas Demand Weigh on Crude
While the stock market continues to make new highs, the crude oil market has taken a beating over the past couple of weeks, a slump that many analysts attribute to pessimism about the U.S. and global economy.
Futures plunged last week and to start this week, making a four-month low before stabilizing. The losses early this week were driven in part by an OPEC-plus meeting that concluded with a plan to start relaxing some of its production cuts starting this fall. There’s another set of production cuts that are set to remain in place through 2025, but this “voluntary” set of cuts that can be unwound starting in October grabbed the market’s attention. Still, the timeline leaves plenty of room for OPEC members to reverse that decision.
There is concern about U.S. driving demand, and weekly data from EIA on Wednesday did not assuage it. Crude oil stockpiles of 455.9 million barrels were up from 454.7 million the prior week, but down 0.7% from a year ago. Analysts were on average expecting a decline of 1.6 million barrels from the prior week. Gasoline demand of 8.946 million barrels per day was down from 9.148 million the prior week, while the four-week average was down 1.0%. Gasoline and distillates stocks were also up, feeding into concern about lower-than-expected demand around Memorial Day.
Ethanol Exports Up 38% in First Four Months of Year
While it’s a little bit of a lagging indicator, the U.S. Census Bureau’s monthly trade data released Thursday reaffirmed that exports have been a good story for U.S. ethanol this year. April exports of 214.2 million gallons were up from 159.3 million in March, up 70% from a year ago, and the second-highest total on record, only behind March 2018. Exports through the first four months of the year were up 38%. Canada is almost always the top buyer, and its April purchases were up 31% to 62.3 million gallons. U.K. purchases were next at 34.2 million gallons, up 80%.
Distillers’ dried grain exports of 970,164 metric tons were down from 1.056 million the prior month, but up 25% from a year ago. DDG exports for the first four months of the year were up 22%.
Output Solid, Stocks Tighten
Ethanol production in the week ended Friday was 1.072 million barrels per day, up from 1.068 million the prior week, topping for the second week in a row the implied pace needed to meet USDA’s corn-used-for-ethanol production. The four-week average is up 3.7% from a year ago. Ethanol stocks of 23.1 million barrels were down from 23.2 million the prior week, but up 0.5% from a year ago.
On Monday, USDA pegged April corn-for-ethanol use at 416.9 million bushels, down 11.7% from March use of 472.1 million bushels, but up 0.7% from April 2023 use of 414.1 million. Total September-April corn-for-ethanol use was roughly 3.606 billion bushels, up 6.0% over a year earlier and still slightly ahead of pace to meet USDA’s target of 5.450 billion bushels which is an increase of 5.3% over 2022/23 use.
Bickering Over SAF
Airlines are increasingly anxious about the availability of Sustainable Aviation Fuel, which is a the center of the industry’s pledge to go “net zero” on carbon emissions by 2050. At a meeting of the International Air Transport Association in Dubai, executives with airlines and energy companies clashed over whether energy producers were doing enough to ramp up SAF production, Reuters reported.
Currently SAF accounts for just 0.5% of airline fuel use. “The fuel companies who (cause) the problem … we need to see those companies like Total (Energies) investing significant sums of money in the development of Sustainable Aviation Fuel,” IATA Director General Willie Walsh said during a closing debate. “That’s the reality of where we are.” Walsh was referring to French company Total Energies. Executives are also hoping for greater government policy support.