Energy Futures Are Drifting Lower This Morning With The ‘Big Three’ Down

Energy futures are drifting lower this morning with the ‘big three’ down around .25-.5% to start the day. Heating oil futures bounced slightly yesterday after setting a new 16-month low, suggesting there are still some market participants that aren’t convinced the distillate benchmark is ready to fall to the $2 level, which is the next major support checkpoint should the selling continue.

Surprisingly weak manufacturing data out of China is taking credit for the selling sentiment this morning. The disappointing report, which shows some signs that this may not be an anomalous reading on the Chinese economy, suggests the country’s return from its Covid lockdown policy may be slower than anticipated.

The CME’s Fed Watch Tool puts the chances of a 25bps rate hike at 94% for tomorrow Fed meeting. While that rate increase has been expected for weeks, the question becomes what will the Fed need to see in the April jobs report (releasing Friday) and inflation data (releasing next Wednesday) in order to consider pausing further rate hikes.  

The EIA published a note highlighting ExxonMobil’s Beaumont refinery expansion that came online earlier this year. As noted in previous market updates, the DOE is including the new output from the completed expansion project, but will not include the new capacity figured until next year. The Department is planning on revising its capacity tallies in June, showing the updated metrics as of Jan 1, 2023. Nouveau Beaumont won’t be included since it started up in March.

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