Outlook: Energy markets have continued trading higher this morning. Yesterday the market received some clarity from OPEC+. The group has agreed to increase production by 500,000 bpd beginning in January, reducing the overall output cut to 7.2 million bpd. Production quotas will be reviewed and adjusted every month as the group sees fit. The increase is much smaller than originally planned, as OPEC+ had scheduled to increase production by nearly 2.0 million bpd beginning next month. Market sentiment had believed that OPEC+ would continue the 7.7 million bpd cut through Q1 of 2021. Despite the agreed upon increase, market reaction has remained positive. Macroeconomic support from vaccine headlines as well as refreshed stimulus negotiations are providing a rosier outlook for the complex. According to FDA officials, both the Pfizer/BioNTech and Moderna coronavirus vaccines should be granted an emergency use authorization sometime next week. Yesterday it was announced that Pfizer had scaled back its Covid-19 production targets for 2020 to 50 million doses, down from a prior estimate of 100 million doses. The Pfizer/BioNTech vaccine requires two doses, meaning that 50 million doses would be enough to immunize 25 million people. The company cited supply chain issues for the scaled back target. Pfizer plans to produce 1.3 billion doses by the end of 2021. Equity markets have pushed higher despite worse than anticipated jobs data released this morning. The S&P 500 has hit a fresh all-time high.
Crude
- Nonfarm payrolls increased by 245,000 in November, which was well below industry expectations, according to data released this morning from the U.S. Department of Labor. Economists surveyed by Dow Jones estimated a 440,000 increase. Job gains came from the transportation and warehousing sector, which increased by 145,000. Retail lost 35,000 jobs. Since February the retail sector has lost 550,000 employees.
- Citigroup has raised its crude price forecast by $3 per barrel for both Brent and WTI in Q1 and Q2 of 2021. They predict that WTI will rise to $48 in Q1, and $50 in Q2.
- The U.S. reported record high Covid-19 cases on Thursday. Hospitalizations and single-day deaths also set a fresh all-time high. The U.S. reported 217,664 new cases of the virus, just over 100,000 hospitalizations, and over 3,100 deaths in a single day. The previous high for single day deaths was set on Wednesday, at just over 2,800, according to data from Johns Hopkins University.
- The U.S. Dollar Index has hit a 2.5 year low this morning, adding support to energy prices.
- The January crude contract is trading $0.35 higher at $45.99. The 20-day and 100-day moving averages are $42.94 and $41.61, respectively. The 14-day RSI is 67.05%.
- As of 9:51 am CST: February Brent is up $0.48 at $49.19, the U.S. dollar index is down 0.067 trading at 90.647 pts, while the nearby e-mini S&P 500 futures contract is up 24.50 points at 3,689.00
Diesel
- January ULSD is down $0.0012, trading at $1.3921. The 20-day and 100-day moving averages are $1.3008 and $1.2457, respectively. The 14-day RSI is 69.39%. An RSI above 70% indicates an overbought market from a technical perspective.
- The Transportation Security Administration screened more than 1 million travelers each day of the four day Thanksgiving holiday weekend. The only other day to top 1 million passengers was October 18. Airline demand has cratered following the holiday however, down over 65% since Tuesday, according to TSA checkpoint data.
Gasoline
- January RBOB is trading $0.0010 higher at $1.2627. The 20-day and 100-day moving averages are $1.1940 and $1.1528, respectively. The 14-day RSI is 63.49%.
- Vehicle travel in early November was as much as 20% lower than in 2019 during the same time period. Travel surged around Thanksgiving however, peaking at about 5% below the prior year, according to a report from StreetLight Data.
Propane
- Propane prices are up this morning. At last look Conway was up $0.0125, trading at $0.5650. Mt. Belvieu was up $0.0100, trading at $0.5975.
- The NOAA has forecast a high probability of warmer than average temperatures for much of the country in its 6-10 day forecast. The 8-14 day forecast calls for a return to more average temperatures. Temperatures here in the Twin Cities approach near 50 degrees by the middle of next week, before cooling back off into the high 20’s and low 30’s by mid-December. Warmer weather will continue to pressure home heating demand for propane.
Natural Gas
- January Natural Gas is up $0.052 at $2.558. The 20-day and 100-day moving averages are $2.882 and $3.159, respectively. The 14-day RSI is 30.82%. An RSI below 30% represents an oversold market from a technical standpoint.
- Yesterday the EIA released their Weekly Natural Gas Storage Report and showed that working gas in storage fell 1 Bcf in the week ending November 27. Natural gas stocks were 343 Bcf higher than last year at this time, and 290 Bcf above the five-year average.
