Outlook: The energy complex has pushed higher this morning as the prospects for larger stimulus payments has helped elevate the demand outlook for crude and products. Yesterday afternoon the U.S. House of Representatives voted to increase the second round of direct payments to $2,000. The measure was approved by a 275-134 vote. The expanded payments face an uphill battle in the Senate however, as Republican leadership has been against higher payments. Senate Minority Leader Chuck Schumer said yesterday that he would try to pass the legislation in the Senate today. Vaccine headlines are also bringing support to the market this morning. Novavax said that it has started a late-stage Covid-19 vaccine study. The study had been delayed twice due to issues in scaling up manufacturing, according to Reuters. The study from Novavax will enroll about 30,000 volunteers in the U.S. and Mexico, with about 65% of the volunteers receiving the vaccine. Equities have been somewhat mixed this morning after hitting intraday highs earlier in the session. Entering today’s session, the S&P 500 was up 15.6% for the year, the DJIA was up 6.5%, and the Nasdaq Composite was up more than 43% in 2020.
Crude
- This afternoon an industry group will release it’s weekly inventory report. Tomorrow morning the EIA will release the Weekly Petroleum Status Report. The Reuters poll of analysts and traders is predicting that the EIA will report a 2.1 million barrel draw in U.S. crude oil stocks for the week ending December 25.
- Iraq’s oil exports from its southern ports are reportedly at 2.7 million bpd thus far in December, according to a statement from Basra Oil Company executive Khalid Hamza. OPEC+ is scheduled to meet on January 3 and 4, as both the Joint Technical Committee and the Joint Ministerial Monitoring Committee will hold meetings to discuss compliance and market conditions. The group is scheduled to increase production by 500,000 bpd in January.
- Cambodia has started extracting crude oil from fields in the Gulf of Thailand, according to a report from Reuters. Production comes from a joint venture between Singapore’s KrisEnergy Ltd. and the Cambodian government. The two parties signed a pact in 2017 to develop the nearly 1,200 square mile field.
- Yesterday the CFTC released its Commitments of Traders report and showed that funds and money managers purchased 2,132 crude oil contracts, increasing net length to 543,270 lots.
- The February crude contract is trading $0.59 higher at $48.21. The 20-day and 100-day moving averages are $47.07 and $42.73, respectively. The 14-day RSI is 61.21%.
- As of 10:11 am CST: February Brent is up $0.49 at $51.35, the U.S. dollar index is 0.291 lower at 90.046, while the nearby e-mini S&P 500 futures contract is up 5.25 points at 3,732.75.
Diesel
- January ULSD is up $0.0113, trading at $1.4903. The 20-day and 100-day moving averages are $1.4442 and $1.2692, respectively. The 14-day RSI is 65.71%.
- Airline travel is seeing a nice jump in demand this week, as 6 of the last 10 days the TSA has screened over 1 million passengers. According to TSA checkpoint data, 1.28 million passengers went through security at U.S. airports on Sunday, which is the highest number since the pandemic hit.
- The Reuters poll of analysts and traders is anticipating that the EIA will report a 1.067 million barrel build in U.S. distillate stocks for the week ending December 25.
- Yesterday the CFTC released its weekly Commitments of Traders Report. They showed that funds and money managers sold 2,868 Heating Oil contracts, reducing net length to 19,387 lots.
Gasoline
- January RBOB is trading $0.0190 higher at $1.3867. The 20-day and 100-day moving averages are $1.3199 and $1.1864, respectively. The 14-day RSI is 66.19%.
- The Reuters poll of analysts and traders is estimating that the EIA will report a 1.778 million barrel build in U.S. gasoline stocks for the week ending December 25.
- Yesterday the CFTC released its weekly Commitments of Traders Report. They showed that funds and money managers bought 105 RBOB contracts, increasing net length to 64,421 lots.
Propane
- Propane prices are once again moving higher this morning. At last look Conway was up $0.0125, trading at $0.7100. Mt. Belvieu was up $0.0075, trading at $0.7325.
- Strong exports and heavy overseas demand continue to push propane prices higher. Colder weather in Japan is driving demand for home heating use. With the U.S. being the largest exporter of propane to the country, it is likely strong exports will continue to buoy prices.
Natural Gas
- January Natural Gas is up $0.075 at $2.380. The 20-day and 100-day moving averages are $2.591 and $3.100, respectively. The 14-day RSI is 36.25%.
- The EIA Natural Gas Storage Report will be released on Thursday.
- Yesterday the CFTC released its weekly Commitments of Traders Report. They showed that funds and money managers purchased 17,051 Natural Gas contracts, increasing net length to 27,007 lots.
Major Equity Averages Performance year-to-date coming into today’s session. The Dow Jones Industrial Average was up about 6.5%, the S&P500 was up 15.6%, and the Nasdaq Composite was up about 43%. Equities typically benefit from the Santa Claus Rally, which is a sustained increase in the stock market that occurs in the last week of December through the first two trading sessions of January.
