Outlook: The energy complex has been mixed this morning as rising Covid-19 cases and slow stimulus negotiations weigh on the market. Crude oil has been down most of the morning, while product markets are holding onto small gains. Lawmakers in Washington are trying to extend government funding for an additional week, allowing for negotiations on the long-awaited stimulus bill to continue. The House plans to vote tomorrow on the funding measure, which would keep the government operating through December 18. Funding will lapse on Saturday if Congress cannot approve the short-term spending bill. White House coronavirus task force member Dr. Deborah Birx issued a warning over the weekend. She stated that the winter months of the pandemic will be “the worst event that this country will face, not just from a public health side.” More than 200,000 people in the U.S. are testing positive for the virus in the latest seven-day average from Johns Hopkins University. The U.S. is closing in on 15 million confirmed cases of the virus as well. Due to the sustained spike in cases, several states have reinstituted more stringent lockdown measures. New York Governor Andrew Cuomo stated that New York City could lose indoor dining within a week due to hospitals nearing capacity. Equities have been somewhat mixed to start the day, as all three major averages have traded both sides of even.
Crude
- The U.S. Food and Drug Administration found no safety concerns with Pfizer/BioNTech’s Covid-19 vaccine, according to a CNBC report. The report also stated that the data submitted to the FDA was “consistent with agency guidelines”, likely clearing a path for the FDA to issue an emergency use authorization within just a few days.
- The next OPEC+ meeting will reportedly take place on January 4, according to Reuters. Last week the group announced that they will begin increasing production by 500,000 bpd next month. Each month OPEC+ will meet to determine production quotas.
- The U.S. oilfield services sector has lost nearly 92,000 jobs due to pandemic related demand contraction, according to a monthly report from the Petroleum Equipment & Services Association. Employment has risen for three straight months however, as the sector has added around 9,000 jobs since September.
- 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 1.514 million barrel draw in U.S. crude stocks for the week ending December 4.
- The January crude contract is trading $0.07 lower at $45.69. The 20-day and 100-day moving averages are $43.62 and $41.70, respectively. The 14-day RSI is 63.42%.
- As of 10:16 am CST: February Brent is up $0.16 at $48.95, the U.S. dollar index is up 0.112 trading at 90.904 pts, while the nearby e-mini S&P 500 futures contract is up 0.25 points at 3,691.00
Diesel
- January ULSD is up $0.0060, trading at $1.4053. The 20-day and 100-day moving averages are $1.3223 and $1.2479, respectively. The 14-day RSI is 69.55%. 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 1.2 million barrel build in U.S. distillate stocks for the week ending December 4.
Gasoline
- January RBOB is trading $0.0097 higher at $1.2655. The 20-day and 100-day moving averages are $1.2085 and $1.1558, respectively. The 14-day RSI is 62.00%.
- The Reuters poll of analysts and traders is estimating that the EIA will report a 2.933 million barrel build in U.S. gasoline stocks last week. The Weekly Petroleum Status Report due out on Wednesday at 9:30am CST will encapsulate gasoline demand for the second half of the Thanksgiving holiday weekend.
- U.S. gasoline consumption during the Thanksgiving holiday fell to the lowest level in more than 20 years, according to an OPIS report. Gasoline sales fell 8.4%, or about 185 million gallons less than the previous week, which represents the lowest gas demand for the Thanksgiving holiday since 1997.
- Shares of Tesla fell from an all-time high as the company announced another share offering that is aiming to raise up to $5 billion. Tesla’s market capitalization is nearly $600 billion, making the new offering worth less than 1% of the company’s value.
Propane
- Propane prices are unchanged this morning. At last look Conway was flat, trading at $0.5625. Mt. Belvieu was also unchanged, trading at $0.6000.
- Mild weather continues to pressure home heat demand for propane. The NOAA has forecast a moderate probability of warmer than average temperatures for the northern half of the country in its 6-10 day forecast. The 8-14 day forecast is calling for temperatures to be well above normal. Temperatures here in Twin Cities look to be around 30 degrees or higher from now until the week of Christmas.
Natural Gas
- January Natural Gas is up $0.023 at $2.429. The 20-day and 100-day moving averages are $2.823 and $3.150, respectively. The 14-day RSI is 29.44%. An RSI below 30% represents an oversold market from a technical standpoint.
- Natural gas futures are up this morning after falling to a 10-week low in yesterday’s trade session. Record natural gas exports are lending support to prices. The amount of gas moving to U.S. export plants rose to an average of 10.7 bcfd thus far in December, which is a record high according to Reuters.
- The Weekly Natural Gas Storage Report from the EIA will be out on Thursday morning.
OPEC+ is planning to divide up the 500,000 bpd production increase proportionally. Russia and Saudi Arabia will be allowed to increase production by 126,000 bpd. See below for a further breakdown.
