Holiday Hours: Wednesday will be normal trading hours. Thursday energy markets will halt at noon. CHS Hedging will not be staffed on Thursday due to the Thanksgiving Holiday. Energy markets will re-open at 5:00pm on Thursday evening. Friday markets will halt at 12:45pm.
Outlook: The energy complex has continued to climb higher this morning, boosted by supportive vaccine news and the prospects of a delayed production increase from OPEC+. The next meeting of the OPEC+ oil ministers is on Monday, November 30. Expectations are that the group will decide to delay the planned 2 million bpd production increase that was originally scheduled for January 2021. A three – six month delay is anticipated. Traders and analysts will be keeping a keen eye on any developments in regard to the next OPEC+ meeting. Confirmation of the delayed production increase will likely send prices higher. Despite the news of two different vaccines with around 95% efficacy, coronavirus cases are going to continue to be an item that weighs on the complex. The U.S. continues to hit record high daily cases on a seven day average, with the latest high being nearly 171,000 cases per day as of Sunday, according to data from Johns Hopkins University. U.S. cases climbed past 12 million over the weekend. AstraZeneca announced this morning that their Covid-19 vaccine shows an average of 70% efficacy in terms of preventing the virus. Two different dosing strategies were tested, one that showed a 90% efficacy, while the other showed a 62% effectiveness. The positive news from AstraZeneca has added to the overall bullish sentiment that has entered both the energy and equity sectors. The DJIA and the S&P 500 are both trading above even this morning, while the Nasdaq Composite has been mostly flat. Shares of cruise lines and airlines have jumped in response to the Covid-19 vaccine news.
- The Indian Oil Corporation has purchased around 20 million barrels of crude from Middle East and West African producers for delivery in early 2021, according to a Reuters report. That is the largest purchase by the refiner since the pandemic started. India is the third largest importer of crude oil in the world.
- Barclays has kept their 2021 price outlook for Brent crude at $53 in their most recent update. They have pegged WTI at $50 per barrel in 2021 as well, citing rollouts of covid-19 vaccines and “output discipline” from OPEC+ as the reasons for their price outlook.
- On Friday Baker Hughes released their Weekly Rig Count Report and showed that U.S. producers cut 5 oil rigs last week, bringing the total down to 231. The next report will be this Wednesday due to the Thanksgiving Holiday.
- On Friday the CFTC released their Weekly Commitments of Traders Report and showed that funds and money managers purchased 384 crude oil contracts, increasing their net length to 505,865 lots. The next COT report will be on Monday, November 30.
- The January crude contract is trading $0.50 higher at $42.92. The 20-day and 100-day moving averages are $39.98 and $41.28, respectively. The 14-day RSI is 59.77%.
- As of 9:48 am CST: January Brent is up $0.76 at $45.72, the U.S. dollar index is down 0.151 trading at 92.543 pts, while the nearby e-mini S&P 500 futures contract is up 13.25 points at 3,567.50
- December ULSD is up $0.0201, trading at $1.3064. The 20-day and 100-day moving averages are $1.1954 and $1.2245, respectively. The 14-day RSI is 65.71%.
- According to TSA checkpoint data, over 1 million travelers passed through TSA security checkpoints on Sunday. Last year at this time there were 2.3 million travelers, representing a demand reduction of about 55%.
- On Friday the CFTC released their Weekly Commitments of Traders Report and showed that funds and money managers sold 1,410 Heating Oil contracts, shortening their net length to 15,024 contracts.
- December RBOB is trading $0.0232 higher at $1.1984. The 20-day and 100-day moving averages are $1.1246 and $1.1423, respectively. The 14-day RSI is 58.24%.
- The U.S. biofuel industry plans to ask President-elect Joe Biden to impose a nationwide standard to reduce emissions from transportation fuels, according to a Reuters report. The Renewable Fuel Standard is scheduled to reset in 2022, when at that point the authority to set new annual targets is at the discretion of the EPA.
- On Friday the CFTC released their Weekly Commitments of Traders Report and showed that funds and money managers bought 7,193 RBOB contracts, and are net long 60,448 lots.
- Propane markets are following crude higher this morning. At last look Conway was trading $0.0100 higher at $0.5025. Mt. Belvieu was up $0.0050, trading at $0.5200.
- A Financial Times article has stated that retailers are struggling to keep portable steel propane tanks in stock, as the pandemic has caused a scarcity. According to the Propane Education and Research Council, demand for retail propane tanks is likely to reach around 500 million gallons this year, up from 284 million in 2019.
- December Natural Gas is trading $0.035 higher at $2.685. The 20-day and 100-day moving averages are $2.964 and $3.042, respectively. The 14-day RSI is 34.92%. An RSI at 30% or lower represents an oversold market from a technical perspective.
- Last week the EIA released their Weekly Natural Gas Storage Report and showed that working gas in storage rose 31 Bcf in the week ending November 13. Natural gas stocks were 231 Bcf above the five year average.
- The next Natural Gas Storage Report from the EIA will be released on November 25.
- On Friday the CFTC released their Weekly Commitments of Traders Report and showed that funds and money managers sold 10,704 Natural Gas contracts, and are net long 44,292 lots.
The amount of crude oil held on tankers has shrunk to the lowest level since April. Tanker inventories have fallen to 114.69 million barrels as of November 20, down 7.7% from the week prior, which is the lowest level achieved since the spring. As pictured below, the contango in Brent has tightened. A wider spread allows traders to purchase crude and store it, selling it later when prices are more advantageous. A shallower contango would suggest that storage may not be economically feasible, as prices now may be better than in the future. The decline in global inventories held in storage may have the market starting to consider an under-supplied scenario.