Outlook: The energy complex has continued its upward trajectory this morning as the market awaits a final decision from the FDA in regard to Moderna’s Covid-19 vaccine. On Thursday evening the FDA’s Vaccines and Related Biological Products Advisory Committee voted 20-0 in recommending Moderna’s Covid-19 vaccine for an emergency use authorization. The FDA is not required to follow the recommendation, but by all accounts it seems that the emergency use authorization will be granted by as early as today. The U.S. government will ship out around 6 million doses of the vaccine within 24 hours of the FDA’s decision. Stimulus negotiations also continue to progress. Leaders on Capitol Hill have said that they are close to an agreement that would provide $900 billion in new funding. Senate Majority Leader Mitch McConnell has stated that lawmakers will likely work through the weekend in order to get a bipartisan deal done, but added that Congress may have to pass a short-term funding bill in order to get enough time to approve the stimulus bill. Federal funding lapses on Saturday at 12:01am EST. The stimulus bill will reportedly include $600 direct payments, and about $300 billion in funding for small businesses. Equity markets have been mixed this morning, as the DJIA and the Nasdaq Composite are down slightly while the S&P 500 has held onto small gains. The stock market is expected to experience massive volume today due to Tesla entering into the S&P 500 at market close.
Crude
- Crude has hit a nine month high today, and is on track for the seventh straight week of gains. Support from outside markets as well as vaccine and stimulus headlines continue to push energy markets higher. A weak dollar has also been beneficial for the price of crude.
- Goldman Sachs has increased their forecast for WTI and Brent for 2021. The bank has Brent pegged at $65 per barrel by the end of 2021, while WTI they have around $62 per barrel.
- Johnson & Johnson has enrolled about 45,000 participants in a late stage trial of its Covid-19 vaccine, according to Reuters. J&J said that they expect to have data from the trial by the end of January. J&J plans to submit an emergency use authorization application to the FDA by February, assuming the vaccine is safe and effective.
- Today at noon CST Baker Hughes will release its Weekly Rig Count Report. Last week U.S. producers added 12 oil rigs, bringing the total up to 258. Current prices and the bullish trend we’re seeing is likely going to incentivize producers to add rigs.
- This afternoon the CFTC will release its Weekly Commitments of Traders Report.
- The January crude contract is trading $0.68 higher at $49.04. The 20-day and 100-day moving averages are $45.93 and $42.12, respectively. The 14-day RSI is 74.27%.
- As of 9:59 am CST: February Brent is up $0.64 at $52.14, the U.S. dollar index is 0.288 higher to 90.110, while the nearby e-mini S&P 500 futures contract is up 6.75 points at 3,726.25.
Diesel
- January ULSD is up $0.0223, trading at $1.5175. The 20-day and 100-day moving averages are $1.4053 and $1.2590, respectively. The 14-day RSI is 79.61%. An RSI above 70% indicates an overbought market from a technical standpoint.
- European air traffic is reportedly up 14% when compared to the week prior, but still down over 60% when compared to the same time period in 2019, according to data from Bloomberg.
- According to TSA checkpoint data, 846,934 passengers went through airport security at U.S. airports yesterday. On the same day in 2019, 2,471,408 travelers went through TSA checkpoints. U.S. air travel demand is still down about 65% when compared to 2019.
Gasoline
- January RBOB is trading $0.0094 higher at $1.3975. The 20-day and 100-day moving averages are $1.2789 and $1.1716, respectively. The 14-day RSI is 76.03%.
- As previously mentioned, Tesla will be joining the S&P 500 today. Tesla’s current market capitalization is greater than $600 billion. Tesla’s stock has increased over 700% this year and will be joining the major index as the seventh-largest company.
Propane
- Propane prices are once again moving higher this morning. At last look Conway was up $0.0375, trading at $0.6750. Mt. Belvieu was up $0.0425, trading at $0.7200.
- Far East Index values are up 9 cents per gallon for January. Strong overseas demand for propane, along with the first major winter storm in the U.S. have helped push propane prices to levels not seen since Spring 2019.
Natural Gas
- January Natural Gas is up $0.072 at $2.708. The 20-day and 100-day moving averages are $2.684 and $3.128, respectively. The 14-day RSI is 46.35%.
- Natural gas futures have found some support this morning as cooler weather and rising home heating demand have helped buoy prices. Record high exports are also helping elevate prices. According to Reuters, the amount of natural gas flowing to export plants has averaged 10.7 bcfd in December, up from November’s record high of 9.8 bcfd.
- The Weekly Natural Gas Storage Report from the EIA was released yesterday morning. The EIA showed that working gas in storage fell 122 Bcf in the week ending December 11. Natural gas stocks were 243 Bcf above the five-year average.
S&P estimates that approximately 129.9 million shares of Tesla will need to be purchased to add it to the S&P 500. At the current price, funds will need to buy $85.2 billion in Tesla stock at market close today. According to CNBC, more than $85 billion in the rest of the S&P 500 will need to be sold to “make room” for Tesla. That is the largest rebalancing in the history of the index. The previous record was $50.8 billion in September 2018. Tesla’s weighting in the index will be 1.52%, meaning that every $11.11 Tesla moves, the S&P 500 will move 1 point.
