Outlook: The energy complex has turned negative this morning as a mutant strain of the coronavirus is raging in the U.K. The mutated virus appears to be more contagious and will likely lead to higher levels of hospitalizations, according to a Bloomberg report. The new strain is 56% more transmissible, according to a study from the Centre for Mathematically Modelling of Infectious Disease at the London School of Hygiene and Tropical Medicine. Denmark, Australia, and Singapore have also reported cases of the new strain. The current vaccines are reportedly just as effective against this new strain however. This morning Democrats in the U.S. House of Representatives moved to increase the size of the direct payment checks in the recently passed stimulus bill. The measure comes as President Trump has railed against the stimulus bill, calling it a disgrace and saying that the direct payments should be $2,000 instead of $600. The measure was blocked by Republicans in the House however. Despite the lack of larger payments, it is still expected that President Trump will sign both the government funding bill and the coronavirus relief bill into law in the near future. Equities have found strength this morning as all three major averages are trading above even.
Crude
- It has been nearly one year since the U.S. and China signed the Phase One trade agreement. China is significantly below the pace necessary to meet its committed purchases of U.S. goods, according to data from the Peterson Institute for International Economics. U.S. trade data also shows that between January and November of 2020, China purchased $82 billion worth of U.S. goods, which is about half of the $159 billion that was agreed to. China has made the least amount of progress in buying U.S. energy products.
- The European Union and the U.K. have agreed on a trade deal one week before the December 31 deadline. The deal comes more than four years after the U.K. voted to leave the bloc of states. The trade agreement has to be ratified by the U.K. and EU parliaments, but expectations are that the pact will be signed by all parties.
- The CDC said that 1,008,025 doses of the Pfizer/BioNTech Covid-19 vaccine had been administered as of Wednesday at 9:00am EST. The government had set a goal of 20 million doses by the end of 2020, leaving just a week to close the massive gap.
- Saudi Arabia’s crude oil exports sank in October by almost 33% when compared to the same time period the year prior. Oil exports were up about 3.5% in October when compared to September however.
- The CFTC’s Commitments of Traders Report will be released on Monday.
- Yesterday Baker Hughes reported that U.S. producers added 1 oil rig last week, bringing the total up to 264. Rig counts have risen for five straight weeks, but are still down 413 when compared to last year at this time. U.S. crude oil production has remained relatively stable around 11 million bpd.
- The February crude contract is trading $0.33 lower at $47.79. The 20-day and 100-day moving averages are $46.83 and $42.64, respectively. The 14-day RSI is 62.03%.
- As of 9:46 am CST: February Brent is down $0.19 at $51.05, the U.S. dollar index is 0.117 lower to 90.296, while the nearby e-mini S&P 500 futures contract is up 9.75 points at 3,691.25.
Diesel
- January ULSD is down $0.0195, trading at $1.4780. The 20-day and 100-day moving averages are $1.4337 and $1.2661, respectively. The 14-day RSI is 67.12%.
- Yesterday the EIA reported distillate demand rose another 172,000 bpd, rising to 4.174 million bpd. Distillate stocks fell another 2.326 million barrels last week as well.
Gasoline
- January RBOB is trading $0.0164 lower at $1.3656. The 20-day and 100-day moving averages are $1.3077 and $1.1818, respectively. The 14-day RSI is 66.59%.
- The Biden transition team is reportedly holding discussions with U.S. biofuel groups. Discussion topics have included compliance with blending laws and the climate agenda the Biden administration plans to pursue. The relationship between the Trump Administration and U.S. biofuel groups has been contentious at times, as the current administration has nearly quadrupled the number of small refinery exemptions that have been handed out. Biofuel groups argue that the exemptions hinder demand for renewable fuels, while the oil industry argues that the exemptions allow small refineries to stay in business.
Propane
- Propane prices are unchanged this morning. At last look Conway was flat, trading at $0.6625. Mt. Belvieu was also unchanged, trading at $0.7000.
- Yesterday morning the EIA reported that U.S. propane inventories fell 2.333 million barrels last week, which was mostly inline with industry expectations. The EIA also reported that propane demand fell 379,000 bpd. Propane exports rose another 145,000 bpd and are currently above the five-year seasonal average.
Natural Gas
- January Natural Gas is up $0.007 at $2.615. The 20-day and 100-day moving averages are $2.647 and $3.116, respectively. The 14-day RSI is 42.31%.
- Yesterday morning the EIA released its Weekly Natural Gas Storage Report. They showed that working gas in storage fell 152 Bcf in the week ending December 18, which was a smaller draw than anticipated. Natural gas stocks were 278 Bcf higher than last year at this time and 218 Bcf above the five-year average.
