Outlook: Crude oil has hit an 11 month high this morning as the February WTI contract touched as high as $51.28. Providing support this morning comes from yesterday's Weekly Petroleum Status Report from the EIA. They reported that crude oil inventories fell by 8 million barrels in the week ending January 1. Product inventories showed massive builds however, more than offsetting the crude draw. The tension that boiled over at the U.S. capitol building yesterday has seemingly had little impact on futures values. Earlier this morning Congress confirmed the election of Joe Biden as President. Both Senate races in Georgia have also been called for Democratic challengers Jon Ossoff and Raphael Warnock, giving Democrats a majority in the House, Senate, and the Presidency. The Biden administration will likely pursue a more aggressive agenda than previously thought. A divided government would have prohibited broad sweeping legislation from passing through both chambers of Congress. Chuck Schumer will be appointed to Senate Majority Leader. He stated earlier on Wednesday that the first priority for Congress will be to increase stimulus checks to $2,000 for those that qualify. Despite a hectic 24 hours in D.C., equities have shaken off any signs of weakness this morning as all three major averages are trading well above even. The Nasdaq Composite has moved above 13,000 for the first time ever, while the S&P 500 has hit a fresh intraday high as well.
Crude
- The U.S. didn’t import any Saudi Arabian crude oil last week for the first time in 35 years, according to data from the EIA.
- UBS has raised its forecast for crude oil prices in 2021 following Saudi Arabia’s decision to voluntarily cut an additional 1.0 million bpd of crude production in February and March. The Swiss investment bank predicts that Brent crude will rise to $60 per barrel by the middle of 2021. UBS also stated that they expect Brent to trade at $63 per barrel in the second half of 2021, and WTI to trade at a $3 per barrel discount to Brent.
- Canadian oil sands production hit a record high in November, according to a Reuters report. Production is projected to continue to rise as producers increase output following the end of government production curtailments in Alberta. Northern Alberta’s oil sands account for about 65% of crude output from Canada, which is the world’s fourth largest oil producer.
- Tomorrow Baker Hughes will release its Weekly Rig Count Report. Last week U.S. producers added 3 oil rigs, bringing the total up to 267.
- The February crude oil contract is trading $0.34 higher at $50.97. The 20-day and 100-day moving averages are $48.15 and $43.08, respectively. The 14-day RSI is 69.26%
- As of 10:09 am CST: March Brent is up $0.30 at $54.60, the U.S. dollar index is 0.391 higher at 89.921, while the nearby e-mini S&P 500 futures contract is up 59.75 points at 3,800.25.
Diesel
- The February ULSD contract is trading $0.0180 higher at $1.5467. The 20-day and 100-day moving averages are $1.4814 and $1.2911, respectively. The 14-day RSI is 69.54%.
- Distillate demand has fallen significantly following the end of the holiday season. The EIA reported that distillate demand fell 653,000 bpd to 2.941 million bpd, representing a contraction of about 18% from the week prior.
- Weak demand has pushed distillate inventories higher, as the EIA reported that distillate stocks rose 6.389 million barrels last week.
Gasoline
- The February RBOB contract is trading $0.0051 higher at $1.4801. The 20-day and 100-day moving averages are $1.3731 and $1.2113, respectively. The 14-day RSI is 71.64%.
- Gasoline demand has dropped to levels not seen since the early days of the pandemic. Yesterday the EIA reported that U.S. gasoline demand contracted 687,000 bpd to 7.441 million bpd, which represents about an 8.5% drop from the week prior.
Propane
- Propane prices are moving higher again this morning. At last look Conway was up $0.0225, trading at $0.8000. Mt Belvieu was up $0.0275, trading at $82.75.
- Propane inventories continue to draw down, due in part to somewhat robust U.S. demand as well as strong exports in recent weeks. The EIA reported that U.S. propane inventories fell 2.369 million barrels last week, while U.S. demand fell 53,000 bpd to 1.702 million bpd. Strong exports and decent demand have helped buoy propane prices in recent weeks.
Natural Gas
- The February Natural Gas contract is trading $0.022 lower at $2.694. The 20-day and 100-day moving averages are $2.598 and $3.041, respectively. The 14-day RSI is 52.93%.
- Natural gas spot prices at the Henry Hub in Louisiana averaged $2.05 per million British thermal units in 2020, the lowest annual average price in decades, according to report from the EIA. Mild weather and demand destruction caused by the pandemic kept pressure on prices throughout much of the year.
- This morning the EIA released its Weekly Natural Gas Storage Report. They reported that working gas in storage fell 130 Bcf in the week ending January 1. Stocks are 138 Bcf higher than last year at this time, and 201 Bcf above the five-year average.
