Morning Highlights
Morning Highlights

12.9.20 The energy complex has turned positive this morning despite bearish inventory data released yesterday from an industry group.

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Dec 9, 2020

Outlook: The energy complex has turned positive this morning despite bearish inventory data released yesterday from an industry group. They reported that U.S. crude stocks rose 1.14 million barrels in the week ending December 4. The Reuters poll of analysts and traders is estimating that the EIA will report a 1.424 million barrel draw in U.S. crude inventories last week. The Weekly Petroleum Status Report from the EIA is due out this morning at 9:30am CST. A 90 year old grandmother became the world’s first person to receive the coronavirus vaccine, as the U.K. started to rollout the vaccine from Pfizer/BioNTech yesterday. Health workers in the country have started vaccinating the most vulnerable. Despite the relief for vulnerable individuals in receiving their first dose, they’ll have to wait two to three weeks for their second dose, according to a Reuters report. Over 61,000 people in the U.K. have died due to the virus. The U.K. is expecting to vaccinate millions of citizens by the end of the year. Coronavirus cases here in the U.S. have exploded since the Thanksgiving holiday. Total cases have crossed the 15 million mark as of yesterday. Stimulus negotiations continue to press onward, as Senate Majority Leader Mitch McConnell announced yesterday that he will not push for the inclusion of legal liability protections in the next stimulus bill. He has also urged other members of Congress to pass a bill before the end of the year. Despite the more bullish outlook for a stimulus bill to advance, equities have been somewhat mixed this morning. The DJIA and the S&P 500 have both held onto small gains, while the Nasdaq Composite has traded both sides of even.

 

Crude


  • Yesterday the EIA released its Short-Term Energy Outlook report for December. The agency has forecast that U.S. crude oil production is expected to fall by 910,000 bpd in 2020 to 11.34 million bpd. That is a larger decline than previously thought, as earlier expectations had predicted a drop of 860,000 bpd. Crude output in 2021 is anticipated to fall another 240,000 bpd to 11.10 million bpd.
  • The EIA has predicted that OPEC crude oil production will average 27.5 million bpd in 2021, up from about 25.6 million bpd in 2020. Rising Libyan crude production as well as output increases from OPEC+ members will contribute to the higher output.
  • Russian Finance Minister Anton Siluanov said today that the decision from OPEC+ last week will help Russia fulfill its budget plan and potentially grow its sovereign wealth fund. OPEC+ agreed last week to increase production by 500,000 bpd in January. Russia’s quota will increase by 126,000 bpd, respectively.
  • Two oil wells in Northern Iraq were set ablaze by explosives in what is being called a terrorist attack, according to the Iraqi Oil Ministry. Technical teams isolated the two wells, preventing any impact on output. The field produces about 25,000 bpd.
  • The January crude contract is trading $0.48 higher at $46.08. The 20-day and 100-day moving averages are $43.84 and $41.74, respectively. The 14-day RSI is 65.01%.
  • As of 9:05 am CST: February Brent is up $0.52 at $49.36, the U.S. dollar index is down 0.063 trading at 90.902 pts, while the nearby e-mini S&P 500 futures contract is up 6.75 points at 3,708.75

 

Diesel

 

  • January ULSD is up $0.0166, trading at $1.4233. The 20-day and 100-day moving averages are $1.3305 and $1.2491, respectively. The 14-day RSI is 71.78%. 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 1.414 million barrel build in U.S. distillate stocks for the week ending December 4. Yesterday an industry group reported that distillate stocks rose 2.32 million barrels last week.

 

Gasoline

 

  • January RBOB is trading $0.0174 higher at $1.2733. The 20-day and 100-day moving averages are $1.2124 and $1.1573, respectively. The 14-day RSI is 63.68%.
  • The Reuters poll of analysts and traders is estimating that the EIA will report a 2.271 million barrel build in U.S. gasoline stocks last week. Yesterday afternoon an industry group reported that U.S. gasoline inventories rose 6.44 million barrels.

 

Propane

 

  • Propane prices are slightly mixed this morning. At last look Conway was down $0.0025, trading at $0.5550. Mt. Belvieu was up $0.0050, trading at $0.5900.
  • According to an OPIS poll of analysts and traders, U.S. propane inventories fell 1.29 million barrels last week. All submissions in the survey were draws, ranging from 600,000 barrels to 2.5 million barrels.
  • IHS Markit has forecast a decline of 985,000 barrels.

 

Natural Gas

 

  • January Natural Gas is up $0.070 at $2.469. The 20-day and 100-day moving averages are $2.793 and $3.146, respectively. The 14-day RSI is 33.35%. An RSI below 30% represents an oversold market from a technical standpoint.
  • Natural gas prices hit a 10 week low yesterday, but prices have since rebounded. Strong exports and an anticipated jump in demand have brought support to futures values.
  • The Weekly Natural Gas Storage Report from the EIA will be out on Thursday morning. Reuters is estimating an 82 Bcf draw in natural gas inventories in the week ending December 4. Last week the EIA reported just a 1 Bcf draw.