Outlook: The energy complex has pushed higher this morning on the news that the FDA is likely to grant Moderna’s Covid-19 vaccine an emergency use authorization later this week. An FDA staff report said the drug meets the necessary criteria to be given the authorization. The report is meant to brief an advisory panel of medical professionals who will vote whether to recommend that the FDA authorize the vaccine for emergency use. The panel of outside medical professionals is scheduled to meet on Thursday, which could mean an approval by the FDA could be granted as early as Friday. Moderna plans to ship 6 million vaccine doses within 24 hours of FDA approval. Despite multiple vaccines and the push for a stimulus bill to be passed before the end of the year, rising Covid-19 cases will continue to weigh on markets. The U.S. is recording about 215,000 new cases of the virus each day, and at least 2,300 deaths each day, based on the seven-day average, according to Johns Hopkins University. Health experts have warned that it will be several months before the general public can receive the vaccination. Congress continues to negotiate a coronavirus stimulus package, with the latest proposal coming yesterday evening. The new plan would split the original $908 bipartisan plan into two separate bills. $748 billion would be in the first bill, which would be used for small businesses and enhanced unemployment benefits. The $160 billion for business liability protections and aid to state and local governments would be in a separate bill, as these have been sticking points for some members of Congress for quite some time. Equities are once again trading higher, with all three major averages trading well above even this morning.
Crude
- Analysts at RBC Capital Markets have forecast that WTI will average $51.50 per barrel in 2021, which is an increase of $5.50 per barrel from prior estimates. They also predict that Brent crude will average $54.50 per barrel next year, a $6.50 per barrel increase over their previous estimate.
- This afternoon an industry group will release their weekly inventory report. Tomorrow morning the EIA will release its Weekly Petroleum Status Report at 9:30am CST. The Reuters poll of analysts and traders is estimating that the EIA will report a 3.50 million barrel draw in U.S. crude stocks for the week ending December 11.
- China’s November crude oil throughput rose 3.2% when compared to the year prior. That measure set a record high on a daily basis, according to data from the National Bureau of Statistics. Chinese refineries processed 14.2 million bpd last month, up from the record high set just one month prior at 14.09 million bpd in October.
- U.S. shale output is expected to fall by about 136,000 bpd in January to 7.44 million bpd, according to the EIA. That would be the lowest output since June. Production in the Permian basin is expected to contract by 44,000 bpd to 4.2 million bpd.
- The January crude contract is trading $0.70 higher at $47.69. The 20-day and 100-day moving averages are $44.95 and $41.93, respectively. The 14-day RSI is 69.69%.
- As of 9:51 am CST: February Brent is up $0.34 at $50.63, the U.S. dollar index is down 0.152 trading at 90.559 pts, while the nearby e-mini S&P 500 futures contract is up 14.75 points at 3,661.25
Diesel
- January ULSD is up $0.0154, trading at $1.4698. The 20-day and 100-day moving averages are $1.3710 and $1.2538, respectively. The 14-day RSI is 75.38%. An RSI above 70% indicates an overbought market from a technical standpoint.
- The Reuters poll of analysts and traders is estimating that the EIA will report a 400,000 barrel build in U.S. distillate stocks for the week ending December 11.
- The EIA has forecast that purchases of diesel and gasoline will return to 97% - 99% of pre-pandemic levels in 2021.
Gasoline
- January RBOB is trading $0.0114 higher at $1.3305. The 20-day and 100-day moving averages are $1.2458 and $1.1642, respectively. The 14-day RSI is 68.91%.
- The Reuters poll of analysts and traders is predicting that the EIA will report a 1.633 million barrel build in U.S. gasoline stocks for the week ending December 11.
- The Ford Mustang Mach-E is arriving at Ford dealerships this week. The Mach-E is Ford’s first EV under an $11 billion investment in electric vehicles through 2022. Top end models of the Mach-E will achieve 0-60mph in about 3.5 seconds, making 459 horsepower and 612 foot pounds of torque. The Mach-E has an estimated range of about 300 miles and is a direct competitor to the Tesla Model 3 and Model Y.
Propane
- Propane prices are moving higher morning. At last look Conway was up $0.0125, trading at $0.5650. Mt. Belvieu was up $0.0100, trading at $0.6050.
- The NOAA has forecast a significant chance for warmer than average temperatures in the 6-10 day forecast. Almost the entire country is anticipated to experience warmer than average weather. Temperatures here in the Twin Cities early next week are near 40 degrees for a couple of days. Temperatures towards the end of the month are expected to fall, but will still remain above normal ranges. Overnight lows will dip into the teens which should help boost demand for home heat use of propane.
Natural Gas
- January Natural Gas is down $0.011 at $2.671. The 20-day and 100-day moving averages are $2.702 and $3.136, respectively. The 14-day RSI is 43.12%.
- The Weekly Natural Gas Storage Report from the EIA will be released on Thursday morning.
- Despite the potential for a large winter storm in the Northeast this week, natural gas futures values have fallen slightly this morning. Reuters is estimating that demand for natural gas will fall from an average of 124.5 bcfd this week to 122.5 bcfd next week.
The International Energy Agency stated this morning that it will be several months before the world sees a “critical mass of vaccinated, economically active people.” They are predicting that as the end of the holiday season approaches and cases of Covid-19 continue to rise globally, more stringent lockdown measures will be instituted and demand could begin to be pressured lower. Meanwhile, OPEC+ is increasing production by 500,000 bpd beginning in January. The graph below shows that the supply and demand balance are near equilibrium in the first half of 2021, but once more people are vaccinated in the latter half of the year, demand will quickly outpace supply.
