Outlook: The energy complex has erased losses from yesterday as traders await a decision from OPEC+. The cartel delayed making a decision on February production yesterday, as the group could not come to a consensus. There hasn’t been an official report as of yet, but the market is expecting that OPEC+ will roll over production in February and not increase output. OPEC sources stated that Russia and Kazakhstan were pushing for another 500,000 bpd increase, while Iraq, Nigeria, and the UAE suggested holding output steady. Cutting production 500,000 bpd in February was also discussed, according to Reuters. Coronavirus related lockdowns are being reinstituted in parts of the world due to a surge in cases caused by a new strain of the virus, particularly in the U.K. and South Africa. Demand will be a constantly moving target due to lockdown measures. OPEC+ will continue to hold monthly meetings in order to discuss market conditions as well as the appropriate steps to take. Moving over to the political spectrum, all eyes will be on the Senate runoff elections being held in Georgia today. Polling data provided by FiveThirtyEight shows both Democratic challengers with small leads. Jon Ossoff holds a 1.8% lead over Republican Senator David Purdue, while Raphael Warnock leads by 2.1% over Republican Senator Kelly Loeffler. It is likely a winner will not be determined in each race for at least a few days following the election. Equities have been slightly mixed this morning as the DJIA and the S&P 500 have traded both sides of even, while the Nasdaq Composite is trading in positive territory.
Crude
- Saudi Arabia has stated in the OPEC+ meeting that they are ready to do voluntary cuts in February, according to a Reuters report.
- Some risk-premium may be pricing itself back into the market as sparks between Iran and South Korea have started to fly. Iranian Revolutionary Guard troops boarded a South Korean tanker and forced the ship to change course to Iran, according to the vessel’s owner. According to Iranian officials, the vessel was seized because it was polluting waters in the Persian Gulf and the Strait of Hormuz. Iranian government officials have also stated that the seizure of the vessel has not amounted to hostage-taking. South Korea has frozen $7 billion in Iranian assets.
- This afternoon an industry group will release its weekly inventory report. Tomorrow the EIA will release the Weekly Petroleum Status Report. The Reuters poll of analysts and traders is anticipating that the EIA will report a 1.5 million barrel draw in U.S. crude oil stocks for the week ending January 1.
- Yesterday afternoon the CFTC released its Weekly Commitments of Traders Report. They showed that funds and money managers sold 15,649 crude oil contracts in the week ending December 29, reducing net length to 541,705 contracts.
- The February crude oil contract is trading $2.35 higher at $49.97. The 20-day and 100-day moving averages are $47.65 and $42.94, respectively. The 14-day RSI is 65.11%
- As of 10:13 am CST: March Brent is up $2.24 at $53.33, the U.S. dollar index is 0.213 lower at 89.656, while the nearby e-mini S&P 500 futures contract is up 4.50 points at 3,696.75.
Diesel
- The February ULSD contract is trading $0.0530 higher at $1.5150. The 20-day and 100-day moving averages are $1.4686 and $1.2870, respectively. The 14-day RSI is 65.74%.
- The CFTC released its Weekly Commitments of Traders Report yesterday and showed that funds and money managers purchased 1,180 Heating Oil contracts last week, increasing net length to 17,906 lots.
- The Reuters poll of analysts and traders is expecting that the EIA will report a 2.821 million barrel build in U.S. distillate stocks for the week ending January 1.
Gasoline
- The February RBOB contract is trading $0.0604 higher at $1.4333. The 20-day and 100-day moving averages are $1.3510 and $1.2052, respectively. The 14-day RSI is 67.01%.
- U.S. renewable fuel credits rose to a three-year high on Monday after the Trump administration missed a deadline to propose an amount of biofuel that refiners must blend into their fuel mix in 2021. D6 RINS traded as high as 79.5 cents yesterday, the highest level since December 2017. D4 RINS traded at $1.04 each, the highest since November 2017.
- The CFTC released its Weekly Commitments of Traders Report yesterday and showed that funds and money managers purchased 5,739 RBOB contracts last week, increasing net length to 78,670 lots.
- The Reuters poll of analysts and traders is predicting that the EIA will report a 1.558 million barrel build in U.S. gasoline inventories in the week ending January 1.
Propane
- Propane prices are moving higher again this morning. At last look Conway was up $0.0150, trading at $0.7700. Mt Belvieu was up $0.0150, trading at $80.50.
- Colder weather and strong export opportunities have continued to support propane prices. Export arbs are likely to remain advantageous through the winter and into early spring, drawing down inventories and buoying prices.
Natural Gas
- The February Natural Gas contract is trading $0.150 higher at $2.731. The 20-day and 100-day moving averages are $2.570 and $3.049, respectively. The 14-day RSI is 53.06%.
- The CFTC released its Weekly Commitments of Traders Report yesterday and showed that funds and money managers sold 9,679 Natural Gas contracts last week, reducing overall net length to 7,744 lots.
- The Natural Gas Storage Report from the EIA will be released on Thursday.
Crude oil has broken above $50 for the first time since February. The February 2021 contract has traded both sides of $50 this morning, touching as high as $50.05.
