Late Thursday, the Senate passed a House-approved bill to raise the debt ceiling, sending the legislation to President Joe Biden. He is expected to sign it into law today and address the nation at 7 p.m. ET. The market had been fairly quiet this week, seeming to hold its’ breath until the decision passed, or to see if the nation would go into default. Now that this news has been digested, the market is on the way up, at the time of this writing both distillate and gas are up $.04 cents.
There are still a few factors that could bring the bears back into the picture, OPEC+ is meeting Sunday June 4th in Vienna. There are conflicting reports, but most sources do not expect the group to deepen supply cuts currently. Another element is the Fed meeting in mid-June with some indication that there may be a rate hike pause. If the Fed were to decide on another rate hike, it could place added pressure on U.S. Manufacturing. The Institute for Supply Management (ISM) indicated yesterday that U.S. manufacturing PMI (Purchasing Managers’ Index) was at 46.9 in May, down from 47.1 the previous month. Higher interest rates are contributing to falling orders. A PMI measure below 50 indicates contraction in manufacturing and this is the 7th consecutive month below 50. From a gas and diesel perspective, this type of environment brings concern about weaking demand.
Some interesting statistics on gas (see graphs below), despite the increase in travel over the Memorial Day weekend, yesterday’s national average for gas didn’t budge and was still at $3.57 per gallon. In our area it is not that high, thankfully, although you may have noticed a jump in pries at the pump in the last few days, which mainly had to do with an $.11 cent increase in the Group 3 Midwest Basis on Wednesday of this week.
Propane has opened the morning up ¾ of a cent at Conway, while Belvieu is up $1.75 cents. Hubs are following the upward momentum along with crude today. LP had been holding steady but is also reacting to the news of the U.S. Senate passing the debt ceiling bill last night. The basics for propane should not be trending up. There was a nice build on this week’s DOE report, an increase of 3.975 million barrels vs the industry expectations calling for a 2.27-million-barrel build, and well above the five-year average for week 21 of the year. We will have to watch to see if propane detaches from the crude movement, and prices within its own fundamentals.
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