Morning Energy Update 2-1-2024

Market Comments: Energy futures are higher in morning trade.

OPEC+ members kept current production quotas unchanged during their meeting Thursday. The group's next output policy meeting is scheduled for March.

The Fed's decision to keep current rates steady and most likely end rate hikes during the current period was boosting crude. Also supporting markets, Chinese officials unveiled new economic assistance measures to aid the repercussions of Evergrande's collapse.

Middle Eastern conflicts are influencing markets as well. Disruptions to shipping routes in the Red Sea continue to provide a layer of uplift. Threats of retaliation by the U.S. for three American lives lost in Jordan is also playing a role.

Limiting the upside, Fed Chair Powell gave no indication the central bank would consider its first rate cut during its March meeting.

First rate cut 'unlikely' in next couple months

As expected, the Fed elected to keep interest rates unchanged at 5.25 - 5.50%.
January marked the 4th straight month rates have been held steady as the Fed continues its quest to tame inflation.
The chart below chronicles rate changes during the current cycle, March will mark two years since the Fed started down this road.
After the Fed's decision, a statement from the Fed seemed to be indifferent about the end of rate hikes.
Of most interest, the Fed indicated a first interest rate cut would 'likely' not occur in March, as many economists were anticipating.

Refinery efficiency numbers fall further

Refinery utilization rates are at their lowest level in more than a year as operations have dropped more than 10% through the first few weeks of 2024.
After dropping 7% the prior week due to cold snap that blanketed most of the southern U.S., utilization dipped another 3% this week.
With talks of earlier turnarounds to refineries occurring this year, it's possible certain refineries have already started maintenance.
With the current reduced utilization numbers, chances for builds to product inventories will be reduced, which could provide a lift to prices.

Crude output slated to expand in 2024

Barring a major shift, oil supplied to the market is expected to jump to a record high of 104.5 mbpd by the end of the year, according to the IEA.
Reuters contributors are forcasting average crude prices to be lower versus last year as a result.
Oil is expected to be oversupplied and in need of cuts to avoid further saturation.
The projected increase to production comes despite ongoing geopolitical influences, which is not expected to tip the scale on pricing.
OPEC+ members are scheduled to meet tomorrow, February 1st to discuss its current output policy. (Any change would be unexpected).
Any physical impact on the flow of crude in the region would undoubtedly change the trajectory of the growth in oil output and supply to the market.

RECOMMENDATIONS:

12/7/2023: Contract 10% of your spring and fall diesel needs bringing the total to 20% for each timeframe.

12/7/2023: Contract 10% of your summer gasoline needs bringing the total to 20%.

12/7/2023: Fill diesel tanks for you and your customers.

11/16/2023: Contract 10% of your fall/winter 24/25 propane needs.

10/4/2023: Contract 10% of your spring/fall diesel needs.

10/4/2023: Contract 10% of your summer gasoline needs.

The information contained in this report is believed to be reliable but is not guaranteed to accuracy or completeness by MID-CO COMMODITIES, INC. or GROWMARK, Inc. This report is provided for informational purposes only and is not furnished for the purpose of, nor intended to be relied upon for specific trading in commodities herein named. This is not independent research and is provided as a service. As such, this is considered a solicitation.

We require all contracts, futures, and/or option orders be called into our office.

Bridget Chinowth/Melissa Grant/Brian Keith/Eugene McGillian

Jeff O’Brian/Jacqueline Witte/Scott Wilson

Energy Risk Management MID-CO COMMODITIES, INC