Outlook: The energy complex has pushed further into negative territory this morning after crude and products were trading both sides of even earlier in the session. The Pfizer/BioNTech coronavirus vaccine has been granted an emergency use authorization from the FDA and has started to be shipped from a facility in Michigan to hundreds of distribution centers across the country. The first dose of the vaccine was administered in New York this morning. The FDA is also likely to grant Moderna’s vaccine the same authorization later this week. New cases of the virus continue to rapidly move higher, as more than 219,000 cases were reported on Saturday, along with over 2,300 deaths. Providing some level of support for the complex comes from the news that an oil tanker was hit with an explosive device in the Saudi port of Jeddah, which is reportedly being called an act of terrorism. We’ve seen some sparks lately, with two Iraqi oil wells falling victim to terrorism last week. Tensions flaring in the region have historically caused dramatic price spikes. Risk-premium doesn’t really appear to be pricing itself in at this time however. Stimulus negotiations here in the U.S. continue to press onward. An update to the bipartisan plan could be introduced today, according to a Reuters report. The $908 billion plan that was previously introduced would be split into two parts in order to improve the likelihood of it being passed through both chambers of Congress. $748 billion would be put towards funding for small businesses and unemployment, while the remainder of the $908 billion would be in a separate bill that would include funding for liability protections. Equity markets have bounced higher this morning, with all three major averages trading well above even.
Crude
- OPEC released its Monthly Oil Market Report this morning. The group is predicting that global oil demand will rebound more slowly in 2021 than previously estimated due to the long-term impacts of the pandemic. OPEC has forecast that global demand will rise by 5.9 million bpd, down from the prior estimate of 6.25 million bpd.
- A weak dollar has provided a layer of support for energy markets this morning. Earlier in the trade session the dollar hit the lowest level since April 2019. A weak dollar is bullish for energy prices.
- OPEC stated that oil output for the group rose to 25.11 million bpd in November, up 710,000 bpd. Rising Libyan crude production was the main reason for the increased output.
- The EIA will release their Monthly Drilling Productivity Report today.
- Algerian Energy Minister Abdelmadjid Attar stated yesterday that OPEC+ will meet on January 4 to discuss and study the market after their decision to raise production by 500,000 bpd in January.
- On Friday Baker Hughes reported that U.S. crude producers added another 12 oil rigs, bringing the total to 258. Rig counts have seen a steady rise in recent weeks, as rising crude oil prices have incentivized U.S. producers. Despite the increase, oil rigs are down 409 when compared to the year prior.
- On Friday the CFTC released its Weekly Commitments of Traders Report and showed that funds and money managers sold 3,821 crude oil contracts, shortening overall net length to 541,138 lots.
- The January crude contract is trading $0.68 lower at $45.89. The 20-day and 100-day moving averages are $44.63 and $41.87, respectively. The 14-day RSI is 66.04%.
- As of 10:04 am CST: February Brent is down $0.21 at $49.76, the U.S. dollar index is down 0.157 trading at 90.819 pts, while the nearby e-mini S&P 500 futures contract is up 26.25 points at 3,687.50
Diesel
- January ULSD is down $0.0135, trading at $1.4234. The 20-day and 100-day moving averages are $1.3590 and $1.2521, respectively. The 14-day RSI is 72.70%. An RSI above 70% indicates an overbought market from a technical standpoint.
- India’s Reliance Industries imported 1.6% more crude oil in November when compared to the same time period in 2019. That is the first annual increase since February, according to data from Reuters. Rising fuel demand in the country has contributed to higher refinery throughput and increased imports.
- On Friday the CFTC released its Weekly Commitments of Traders Report and showed that funds and money managers purchased 1,823 ULSD contracts, increasing net length to 22,255 lots.
Gasoline
- January RBOB is trading $0.0162 lower at $1.2915. The 20-day and 100-day moving averages are $1.2364 and $1.1623, respectively. The 14-day RSI is 66.88%.
- London will move into the U.K.’s most stringent tier of coronavirus restrictions starting on Wednesday due to a sharp rise in coronavirus cases. The country has three tiers of restrictions, with the third being the toughest. Under Tier 3, people cannot mix indoors or in private backyards. Most outdoor venues will be shut down as well.
- On Friday the CFTC released its Weekly Commitments of Traders Report and showed that funds and money managers purchased 4,045 RBOB contracts, increasing net length to 64,316 lots.
Propane
- Propane prices are moving higher morning. At last look Conway was up $0.0125, trading at $0.5650. Mt. Belvieu was up $0.0150, trading at $0.6050.
- The NOAA’s 6-10 day and 8-14 day forecast are calling for a high probability of warmer than average temperatures for much of the country. Precipitation chances are elevated in the 6-10 day forecast, but chances appear to be quite low in the 8-14 day outlook. Temperatures here in the Twin Cities look to be about 30 degrees or higher through the end of December. Overnight lows start to dip into the teens however, which should further boost home heat demand for propane.
Natural Gas
- January Natural Gas is up $0.088 at $2.679. The 20-day and 100-day moving averages are $2.713 and $3.139, respectively. The 14-day RSI is 44.99%.
- Natural gas prices have risen to a more than one week high today. Winter Storm Gail is forecast to hit the Northeast on Wednesday and Thursday, which is providing some support for prices. Record high exports are also helping push prices higher. According to Reuters, the amount of natural gas moving to U.S. export plants rose to an average of 10.9 bcfd so far in December. November’s average was 9.8 bcfd, which was a record high.
- On Friday the CFTC released its Weekly Commitments of Traders Report and showed that funds and money managers sold 29,860 Natural Gas contracts, reducing net length to 9,956 lots.
