Outlook: The energy complex has been mixed this morning as crude and products have fallen from intraday highs and pushed into negative territory. The complex is weighing an OPEC+ meeting of the Joint Ministerial Monitoring Committee today. The committee is holding a meeting to determine if OPEC+ should raise production in February. According to a Reuters report, three OPEC+ sources have stated that most members of the broader group oppose plans to increase output in February, citing rising Covid cases and weak demand. OPEC+ increased production by 500,000 bpd starting January 1, 2021, but are still cutting 7.2 million bpd. Yesterday OPEC Secretary General Mohammad Barkindo warned of the downside risks the group is facing. He stated that the outlook for the first half of 2021 is “very mixed and there are still many downside risks to juggle.” Barkindo also cited concerns about the mutant strain of the virus that has been documented in at least 30 countries. The new strain is anywhere from 10% - 60% more contagious, and could become the dominant form of the virus in time, according to a New York Times report. Outside of the pandemic and OPEC+ headlines, the complex will look ahead to the Senate runoff elections in Georgia scheduled for tomorrow. The runoff elections will have vast implications and will shape the agenda the Biden administration will likely pursue. A divided government will make an aggressive agenda difficult as broad sweeping legislation will be unlikely to pass through both chambers of Congress. According to FiveThirtyEight, both Democratic challengers are ahead in the polls as of this morning. Jon Ossoff leads Republican Senator David Purdue by 1.4%, while Raphael Warnock leads Republican Senator Kelly Loeffler by 2.0%. Equity markets have experienced the same mixed trading that energy markets have seen, as all three major averages have now pushed deeper into negative territory.
Crude
- The U.K. has started to roll out the vaccine that was developed by AstraZeneca and the University of Oxford today.
- Marathon Petroleum’s contract with the union at its St. Paul Park refinery expired at midnight on Thursday of last week without a resolution. The possibility of a strike at the facility is increasingly likely, according to a union official. Around 200 workers would go on strike if it were to happen.
- IHS Markit has released its December report for U.S. manufacturing. They showed that the U.S. Manufacturing PMI for December rose to 57.1, up from 56.7 in November. A measure above 50 represents an expansion. U.S. manufacturing activity has increased at the most rapid rate since September 2014.
- Russian crude production declined in 2020 for the first time since 2008, according to data from Reuters. Russian crude output has fallen to the lowest level since 2011 as well. The OPEC+ agreement that was reached in the spring, along with lowered demand due to the pandemic forced Russian producers to cut output.
- The February crude oil contract is trading $0.81 lower at $47.71. The 20-day and 100-day moving averages are $47.53 and $42.89, respectively. The 14-day RSI is 62.93%
- As of 9:42 am CST: March Brent is down $0.07 at $51.73, the U.S. dollar index is 0.152 lower at 89.785, while the nearby e-mini S&P 500 futures contract is down 21.25 points at 3,727.50
Diesel
- The February ULSD contract is trading $0.0133 lower at $1.4707. The 20-day and 100-day moving averages are $1.4649 and $1.2857, respectively. The 14-day RSI is 64.98%.
- The Covid-19 pandemic caused U.S. airlines to lose around $35 billion in 2020, according to analyst estimates from FactSet. Southwest Airlines is expected to report their first annual loss in more than four decades. Relief for airline demand will be contingent on an effective rollout of the various vaccines, which is expected to occur in the second half of 2021.
Gasoline
- The February RBOB contract is trading $0.0264 lower at $1.3837. The 20-day and 100-day moving averages are $1.3452 and $1.2031, respectively. The 14-day RSI is 67.74%.
- The current national average retail price for gasoline is $2.256, according to data from AAA. Prices have remained relatively flat for the last week. Retail prices last year at this time averaged $2.585.
Propane
- Propane prices are pushing higher once again this morning. At last look Conway was up $0.0500, trading at $0.7700. Mt Belvieu was up $0.0550, trading at $80.50
- Colder weather in parts of the country along with strong exports are likely to continue supporting propane prices. Last week the EIA reported that U.S. propane demand rose 463,000 bpd to 1.755 million bpd, while exports also rose 133,000 bpd to 1.634 million bpd.
Natural Gas
- The February Natural Gas contract is trading $0.089 higher at $2.628. The 20-day and 100-day moving averages are $2.566 and $3.053, respectively. The 14-day RSI is 48.33%.
- Natural gas futures have pushed higher this morning on the back of colder weather and an anticipated jump in demand. Global prices are also trading at their highest value in some time, prompting buyers from Asia and Europe to purchase more U.S. natural gas, according to Reuters.
- Last Thursday the EIA released its Weekly Natural Gas Storage Report. They showed that working gas in storage fell 114 Bcf in the week ending December 25. Natural gas stocks were 206 Bcf above the five-year average.
