Outlook: The energy complex has pushed higher this morning despite bearish data released yesterday from the EIA. The agency reported that combined crude, gasoline, and distillate inventories rose over 24.5 million barrels last week. Providing support to the complex this morning is the news that the FDA is scheduled to vote today on whether to recommend the approval of the Pfizer/BioNTech coronavirus vaccine for emergency use. The meeting is scheduled to run from 9:00am EST to 6:00pm EST. Emergency use authorization would mean that the FDA will allow some people to be vaccinated while the agency continues to research and evaluate the data. Full approval is expected to take months. Pfizer/BioNTech have only submitted two months of follow-up data, while the FDA typically requires six months for full approval. If an emergency use authorization is granted, the U.S. government is expected to ship 2.9 million doses of the vaccine within 24 hours to locations across the country. An additional 2.9 million doses will be distributed 21 days later for second doses. Dr. Moncef Slaoui, who is leading Operation Warp Speed, has stated that the U.S. should be able to distribute enough doses to immunize 100 million citizens by the end of February, and the entire country by the end of June. Brent crude prices have risen above $50 per barrel for the first time since March, as the U.K. has recently started to vaccinate high risk individuals. A weakening dollar has also provided a layer of support for energies this morning as well. Worse than anticipated jobs data has weighed on equities, as all three major averages have experienced a mixed trading session so far today.
Crude
- This morning the U.S. Department of Labor reported that first time claims for unemployment insurance totaled 853,000 last week. Economists surveyed by Dow Jones anticipated 730,000 first time claims. This was the highest weekly total since mid-September. Continuing claims have increased for the first time in 12 weeks, rising by 230,000 to 5.76 million.
- Yesterday it was reported that a terrorist attack at a northern Iraqi oilfield took place, causing fires to break out at two wells. Overall production from the field has not been affected however. Some risk-premium, along with the vaccine optimism, may be pricing itself into the market.
- Iraq is poised to sign a multi-billion dollar contract with China’s ZhenHua Oil Company. The Iraqi government is exchanging the funds, which will be received up front, for long-term oil supplies. China’s crude demand is estimated to rise by an additional 3% by 2025, according to the Energy Economics Institute of CNOOC.
- The January crude contract is trading $2.07 higher at $47.59. The 20-day and 100-day moving averages are $44.11 and $41.79, respectively. The 14-day RSI is 70.49%. An RSI above 70% represents an overbought market from a technical standpoint.
- As of 10:28 am CST: February Brent is up $2.04 at $50.90, the U.S. dollar index is down 0.161 trading at 90.926 pts, while the nearby e-mini S&P 500 futures contract is up 2.50 points at 3,675.00
Diesel
- January ULSD is up $0.0586, trading at $1.4575. The 20-day and 100-day moving averages are $1.3395 and $1.2501, respectively. The 14-day RSI is 74.51%.
- Indian Oil Corporation operated its 9 plants at 100% capacity last month for the first time since February. Rising local fuel demand from a gradual rise in industrial and economic activity has pushed utilization to 100%. The refiner operated its plants at about 88% in October 2020, according to data from Reuters.
- Yesterday the EIA reported that U.S. distillate stocks increased by 5.223 million barrels last week, while demand fell by 400,000 bpd.
Gasoline
- January RBOB is trading $0.0544 higher at $1.3303. The 20-day and 100-day moving averages are $1.2206 and $1.1591, respectively. The 14-day RSI is 70.96%.
- Yesterday the EIA reported that U.S. gasoline stocks rose 4.221 million barrels last week. Gasoline demand contracted once again, down another 373,000 bpd.
Propane
- Propane prices are moving higher morning. At last look Conway was up $0.0125, trading at $0.5600. Mt. Belvieu was up $0.0200, trading at $0.6000.
- Yesterday the EIA reported that U.S. propane inventories fell by 4.080 million barrels last week, which was a significantly larger draw than expected. Propane demand rose 681,000 bpd to 1.691 million bpd.
Natural Gas
- January Natural Gas is up $0.127 at $2.569. The 20-day and 100-day moving averages are $2.762 and $3.143, respectively. The 14-day RSI is 38.76%.
- The EIA released its Weekly Natural Gas Storage Report this morning and showed that working gas in storage fell 91 Bcf in the week ending December 4. Natural gas stocks are 309 Bcf higher than last year at this time, and 260 Bcf above the five-year average.
