Outlook: Energy prices have fallen this morning as traders and market analysts await a decision from OPEC+. The OPEC+ energy ministers are holding meetings today and tomorrow, where it will be determined whether or not the group will continue cutting 7.7 million bpd, or if they’ll increase production in January as originally planned. It has been reported that the group failed to agree on policy in informal discussions held over the weekend, with opposition coming from the UAE and Kazakhstan. Market expectations are that the group will extend the current production cut for an additional three months. Goldman Sachs has stated that if OPEC+ continues to reduce output by 7.7 million bpd through Q1 of 2021, global inventories will draw down by 1 million bpd during that time. Providing the market some support and preventing a further sell off is the news from Moderna that their Covid vaccine is more than 94% effective. Moderna said that it will request emergency clearance from the FDA later today, which would mean that the first doses of the vaccine would be available within just a few weeks if the authorization were granted. Moderna would be the second company to apply for the authorization, Pfizer being the first on November 20. Despite the positive vaccine news, equities have started the day in the red. All three major averages are trading well below even. Pressuring equities is the news that the Trump administration may blacklist Chinese chipmaker SMIC as well as the national oil and gas producer CNOOC.
Crude
- The amount of crude oil stored at sea on tankers has continued to drop. As of November 27, 111.37 million barrels of crude is currently being held in floating storage for at least seven days. That is the lowest amount since April and down about 5.5% from the prior week. As WTI and Brent flip from contango to backwardation, the trend should continue and we’ll likely see floating inventories continue to draw down as the incentive to store crude has been removed.
- A Reuters poll of 40 economists has forecast that Brent crude will average $49.35 per barrel in 2021. Goldman Sachs has predicted that Brent crude would rise to $65 next year.
- OPEC production rose for a fifth straight month in November, according to a Reuters poll. The 13-member organization produced 25.31 million bpd, up about 750,000 bpd from October. The increase is largely due to rising Libyan crude oil production. Output from the UAE also rose by 90,000 bpd.
- Six sources at refineries in Asia expect the January official selling price for Saudi Aramco’s Arab Light crude to rise by 65 cents per barrel, according to a Reuters report.
- The January crude contract is trading $0.37 lower at $45.16. The 20-day and 100-day moving averages are $41.55 and $41.45, respectively. The 14-day RSI is 65.69%.
- As of 9:56 am CST: January Brent is down $0.49 at $47.69, the U.S. dollar index is down 0.065 trading at 91.725 pts, while the nearby e-mini S&P 500 futures contract is down 35.75 points at 3,600.75.
Diesel
- December ULSD is down $0.0180, trading at $1.3625. The 20-day and 100-day moving averages are $1.2428 and $1.2280, respectively. The 14-day RSI is 69.12%. An RSI above 70% indicates an overbought market from a technical perspective.
- U.S. air travel demand rose to a pandemic high during the Thanksgiving weekend, according to data from the Transportation Security Administration released this morning. About 1.2 million passengers went through airport security on Sunday, which was the most since March 16. Despite the uptick, nearly 2.9 million passengers went through security checkpoints on the same day last year, representing a drop of about 60% in a year on year comparison.
Gasoline
- December RBOB is trading $0.0212 lower at $1.2608. The 20-day and 100-day moving averages are $1.1673 and $1.1483, respectively. The 14-day RSI is 64.09%.
- HollyFrontier announced today that they plan to double capital expenditure in 2021, with increased spending on renewables. The refiner plans to spend between $1.05 billion and $1.15 billion, up from $475 million to $550 million in 2020. The company stated that nearly half of the capex spending in 2021 will be on renewables, accounting for $500 million to $530 million, which would represent a nearly four-fold increase in spending in the sector.
Propane
- Propane prices are up this morning. At last look Conway was up $0.0175, trading at $0.5425. Mt. Belvieu was up $0.0150, trading at $0.5700.
- Somewhat cooler weather has entered the NOAA’s 6-10 day and 8-14 day outlook. Temperatures in the northern half of the country are expected to be slightly above average over the next two weeks. Overnight lows in the Twin Cities are well below freezing, which should provide some support for home heat demand.
Natural Gas
- January Natural Gas is trading $0.098 higher at $2.941. The 20-day and 100-day moving averages are $2.991 and $3.167, respectively. The 14-day RSI is 45.21%.
- Natural gas futures are at a two-week high today as record exports and colder weather through mid-December are helping support prices. The amount of gas moving to export plants averaged 9.8 billion cubic feet per day so far in November, which is up from the five-month high of 7.7 bcfd in October, according to data from Reuters.
- EOG Resources said that they will start selling natural gas from 15 new wells from a newly discovered field that holds 21 trillion cubic feet of gas. The announcement comes as shale producers are increasing spending on natural gas, as forecasts are calling for a 45% increase in price next year versus a 15% increase for crude. The number of natural gas rigs has climbed 13% since July, according to data from Baker Hughes.
