Morning Highlights
Morning Highlights

11.24.20 Morning Energy Comments

Ryan Kaup

Nov 24, 2020

Outlook: Energy markets are up once again this morning as optimism continues to grow surrounding three different coronavirus vaccines with high efficacy rates. Yesterday AstraZeneca announced that one of their dosing strategies showed to be about 90% effective in preventing the virus. Pfizer and Moderna recently showed their respective vaccines were around 95% effective. Pfizer is now waiting on the FDA to grant them an emergency use authorization, while Moderna is likely to file for the same exemption before the end of the month. The vaccine optimism has helped boost crude prices to their highest level since March. Providing further support this morning is news that the Trump Administration has informed the General Services Administration that the transition to President-elect Biden can begin. GSA Administrator Emily Murphy sent a letter to Biden on Monday, saying that he would have access to federal resources to help facilitate the transition. Some risk premium may also be pricing itself into the market today, as yesterday it was reported that Houthi forces fired a missile at Saudi Aramco’s North Jeddah Bulk Plant. The attack was confirmed by the Saudi’s. The strike hit a storage tank at the plant, causing a large fire that was quickly distinguished. Aramco stated that their fuel supplies had not been affected by the attack, and operations resumed just three hours after the strike. This afternoon an industry group will release their weekly inventory report. The Reuters poll of analysts and traders is estimating that the EIA will report a 130,000 barrel build in U.S. crude oil stocks for the week ending November 20. The Weekly Petroleum Status Report from the EIA will be out tomorrow as per usual.

 

Crude

 

  • OPEC+ is scheduled to meet on November 30 and December 1. Goldman Sachs expects the group to delay the scheduled 2 million bpd production increase for three months. The output increase is scheduled to take effect in January 2021 if no extension is agreed upon. If OPEC+ does continue the 7.7 million bpd production cut for an additional three months, Goldman Sachs estimates that the global market deficit will be 1.0 million bpd in Q1 of 2021.
  • The Dow Jones Industrial Average traded more than 400 points higher this morning, rising about 1.4%, hitting an intraday all-time high. The S&P 500 has risen about 1.25% as well. Energy has been the best performing sector in the S&P 500 today, rising around 4%.
  • Enbridge Inc. said yesterday that they had received federal permits for its Line 3 pipeline replacement project from the U.S. Army Corps of Engineers. Line 3 ships crude from Alberta to refineries in the Midwest. The Line 3 replacement would bring capacity to 760,000 bpd, nearly doubling current output.
  • Yesterday Reuters reported that an armed group attempted to storm Libya’s National Oil Corporation Headquarters in Tripoli. The attempted attack was stopped by guards, and nobody was hurt in the incident. Libya’s oil production has seen a rapid rise since September. Prior to the removal of the military blockade of the country’s ports and oil facilities, Libyan crude production was near 0. Now production has risen to over 1.2 million bpd.
  • The January crude contract is trading $1.80 higher at $44.86. The 20-day and 100-day moving averages are $40.24 and $41.32, respectively. The 14-day RSI is 66.65%.
  • As of 10:00 am CST: January Brent is up $1.63 at $47.69, the U.S. dollar index is down 0.186 trading at 92.319 pts, while the nearby e-mini S&P 500 futures contract is up 40.75 points at 3,616.75

 

Diesel

 

  • December ULSD is up $0.0529, trading at $1.3634. The 20-day and 100-day moving averages are $1.2062 and $1.2253, respectively. The 14-day RSI is 72.09%. An RSI above 70% indicates an overbought market from a technical perspective.
  • The Reuters poll of analysts and traders is predicting that the EIA will report a 1.6 million barrel draw in U.S. distillate stocks for the week ending November 20.
  • Air travel demand in China has rebounded to near pre-pandemic levels, according to a Bloomberg report. Domestic travel in the country was seen at about 88% of the level achieved the year prior, due in large part to the Golden Week holiday in October. Air travel demand here in the U.S. is still quite subdued however, down about 55% when compared to last year at this time.

 

Gasoline

 

  • December RBOB is trading $0.0552 higher at $1.2592. The 20-day and 100-day moving averages are $1.1318 and $1.1438, respectively. The 14-day RSI is 66.25%.
  • The Reuters poll of analysts and traders is estimating that the EIA will report a 600,000 barrel build in U.S. gasoline stocks for the week ending November 20.
  • Yesterday it was reported that Tesla CEO Elon Musk had surpassed Bill Gates as the second wealthiest person in the world, behind Amazon’s CEO Jeff Bezos. Musk’s net worth has risen more than $100 billion in 2020 alone. Today Tesla’s market cap hit $500 billion for the first time, as shares have pushed past the $527.48 mark required to achieve the milestone. Earlier in the month the company reported that it had delivered 139,300 vehicles in the third quarter, which was a new record for the automaker.
  • U.S. gasoline demand rose 3.7% in the week ending November 21, according to the Head of Petroleum Analysis at GasBuddy.

 

Propane

 

  • Propane markets are following crude higher this morning. At last look Conway was trading $0.0250 higher at $0.5200. Mt. Belvieu was up $0.0275, trading at $0.5425.
  • The NOAA has forecast a high probability of warmer than average temperatures for much of the northern half of the country in both the 6-10 day and 8-14 day forecast. Temperatures here in the Twin Cities will hover in the 40’s through the Thanksgiving Holiday weekend before cooling off into the mid 30’s through the first week of December. Warmer than average temperatures will continue to weigh on home heat demand for propane.

 

Natural Gas

 

  • December Natural Gas is trading $0.044 higher at $2.755. The 20-day and 100-day moving averages are $2.938 and $3.043, respectively. The 14-day RSI is 40.29%.
  • The Weekly Natural Gas Storage Report from the EIA will be released tomorrow due to the Thanksgiving Holiday. 

 

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.