Outlook: The energy complex has taken a step back this morning despite Congress passing a long-awaited stimulus and government funding bill. Yesterday Congress passed legislation for the $900 billion coronavirus relief bill and $1.4 trillion to fund the government through September 30, 2021. The stimulus bill includes $600 direct payments to taxpayers making under a certain amount, $300 per week in federal unemployment, nearly $300 billion in the Paycheck Protection Program, and another $8 billion for Covid-19 vaccine distribution. The House approved the package in a 359-53 vote, while the Senate passed it with a 92-6 vote. Democrats have called for another stimulus bill when President-elect Joe Biden is sworn into office in 2021. The Senate runoff races in Georgia will likely play heavily into what sort of stimulus measures are pursued by the Biden administration. A divided government will make it much more difficult to pass sweeping legislation. On Monday Treasury Secretary Steven Mnuchin stated that people were going to see the $600 direct payments arrive by early next week. Providing some support from a macro perspective is the news that the U.S. Department of Commerce has adjusted the GDP growth rate higher in the previous quarter. GDP rose at a 33.4% annualized rate in Q3, up from the 33.1% increase reported last month. The economy contracted 31.4% in Q2, which was the steepest rate since the government started keeping records in 1947. Equity markets have been slightly mixed this morning as all three major averages have traded both sides of even.
Crude
- A “mutant” strain of the coronavirus has occurred in the U.K., and has revived concerns over energy demand, prompting today’s dip in prices. Several countries have closed their borders to the U.K. in response to the outbreak.
- A study from the Peter G. Peterson foundation states that around 80% of households earning less than $75,000 used the previous stimulus check to pay for living expenses. In comparison, about 55% of households making $150,000 or more used the previous stimulus check for living expenses, while the other 45% paid down debt or saved the money, neither of which do much to stimulate the economy. Peter G. Peterson was the Secretary of Commerce in the Nixon Administration.
- This afternoon an industry group will release its Weekly Inventory Report. Tomorrow morning the EIA will release the Weekly Petroleum Status Report. The Reuters poll of analysts and traders is anticipating that the EIA will report a 3.25 million barrel draw in U.S. crude oil stocks last week.
- ConocoPhillips has made an oil discovery in the Norwegian Sea that is estimated to hold between 76 million and 201 million barrels of recoverable crude oil.
- The February crude contract is trading $0.47 lower at $47.50. The 20-day and 100-day moving averages are $46.59 and $42.54, respectively. The 14-day RSI is 59.96%.
- As of 10:09 am CST: February Brent is down $0.66 at $50.25, the U.S. dollar index is 0.616 higher to 90.659, while the nearby e-mini S&P 500 futures contract is down 4.25 points at 3,681.50.
Diesel
- January ULSD is down $0.0049, trading at $1.4725. The 20-day and 100-day moving averages are $1.4222 and $1.2627, respectively. The 14-day RSI is 65.52%.
- Tomorrow morning the EIA will release its Weekly Petroleum Status Report. The Reuters poll of analysts and traders is estimating that the EIA will report a 650,000 barrel draw in U.S. distillate stocks for the week ending December 18.
- Crude oil throughput for India’s refineries hit an 8 month in November, according to data from Reuters. Throughput increased 16% to 5.08 million bpd last month, and is now down just over 5% from pre-pandemic levels. Demand for road fuels has also increased, rising for a third straight month in November.
Gasoline
- January RBOB is trading $0.0106 lower at $1.3498. The 20-day and 100-day moving averages are $1.2957 and $1.1767, respectively. The 14-day RSI is 62.14%.
- The Reuters poll of analysts and traders is anticipating that the EIA will report a 1.175 million barrel build in U.S. gasoline stocks for the week ending December 18.
Propane
- Propane prices are somewhat mixed this morning. At last look Conway was down $0.0075, trading at $0.6625. Mt. Belvieu was unchanged, trading at $0.7000.
- Some colder weather is finally starting to make its way into the forecast. According to the 6-10 day and 8-14 day forecast from the NOAA, mostly average temperatures are expected to occur for much of the country. Overnight lows here in the Twin Cities are below 0 for the first time this year in the nearby forecast. Colder overnight temperatures should continue to boost demand for home heating use for propane.
Natural Gas
- January Natural Gas is up $0.078 at $2.783. The 20-day and 100-day moving averages are $2.680 and $3.125, respectively. The 14-day RSI is 52.06%.
- The Weekly Natural Gas Storage Report from the EIA will be released tomorrow. The report is typically released on Thursday, but due to the Holiday it will be released a day early.
- Reuters is expecting that the EIA will report a 164 Bcf draw in U.S. Natural Gas Stocks for the week ending December 18.
India has recently recorded its lowest daily increase in Covid-19 cases since July 3, according to data from India’s Health Ministry. Despite the contraction in cases, India still has the second highest number of cases globally, surpassing 10 million this past weekend. However, having a population that exceeds 1.35 billion, which is more than 1 billion more than the U.S., infection rates per capita are quite low. As cases have started to fall, demand for road fuel has increased. Indian Oil Corporation operated its refineries at 108.4% capacity in November. Non-state owned assets operated at an average of 101.2% last month.
