Outlook: Energy markets have been slightly mixed this morning as mounting Covid-19 cases have put pressure on the complex. New variants of the virus that have popped up in the U.K., South Africa, and Brazil are reportedly much more infectious than the normal strain. According to data from Johns Hopkins University, on a seven day average, the U.S. is reporting at least 247,600 new Covid-19 cases and at least 3,340 virus related deaths each day. Global cases have reached nearly 92 million, and expectations are that we’ll reach 100 million before the end of January. Yesterday afternoon an industry group reported that U.S. crude oil stocks fell more than expected last week. They showed that crude inventories fell 5.8 million barrels in the week ending January 8. The Reuters poll of analysts and traders is estimating that the EIA will report a 2.3 million barrel draw in the Weekly Petroleum Status Report. The U.S. Department of Labor stated this morning that its consumer price index increased 0.4% in December, and 0.2% in November. A nearly 8.5% increase in the cost of gasoline accounted for well over half of the rise in the CPI. Overall, the CPI rose 1.4% in 2020, which was the smallest increase since 2015. A stronger dollar and weakness in equities are also causing some of the softness we’re experiencing in energy markets to start the day. All three major equity averages are trading slightly below even.
Crude
- According to data from the CDC, only about 9 million people in the U.S. have received a Covid-19 vaccination. Operation Warp Speed had hoped for 20 million by the end of 2020. Despite the slow and challenging roll-out, on Monday 1.25 million doses were administered, which was a single day record. Perhaps that is a sign that some efficiencies are being implemented and more doses are being administered in a more timely manner.
- The New York Times is reporting that about 130,000 people in the U.S. are currently hospitalized with symptoms from Covid-19, which is more than double the number from two months ago. Deaths from the virus have hit a record high recently, with more than 3,000 people in the U.S. passing away each day on average. The recent explosion in cases likely means that the daily death totals will push to more than 3,500 per day, and possibly over 4,000 per day.
- Global oil demand is likely to recover by 6 to 6.5 million bpd in 2021, according to the CEO of Vitol, Russel Hardy. Hardy also stated that a recovery in demand in parts of Europe is not expected until after Q1 due to lockdown measures that have been reinstituted to control the spread of the virus.
- The February crude oil contract is trading $0.18 lower at $53.03. The 20-day and 100-day moving averages are $49.34 and $43.42, respectively. The 14-day RSI is 71.81%. An RSI above 70% represents an overbought market from a technical perspective.
- As of 9:20 am CST: March Brent is down $0.34 at $56.24, the U.S. dollar index is 0.189 higher at 90.282, while the nearby e-mini S&P 500 futures contract is down 2.5 points at 3,792.00.
Diesel
- The February ULSD contract is trading $0.0045 lower at $1.5922. The 20-day and 100-day moving averages are $1.5107 and $1.3005, respectively. The 14-day RSI is 71.13%.
- The Reuters poll of analysts and traders is estimating that the EIA will report a 2.671 million barrel build in U.S. distillate stocks for the week ending January 8.
- Yesterday afternoon an industry group reported that U.S. distillate stocks rose 4.43 million barrels last week. If the EIA reports a build it will have been the 6th build in 7 weeks.
Gasoline
- The February RBOB contract is trading $0.0025 lower at $1.5505. The 20-day and 100-day moving averages are $1.4192 and $1.2246, respectively. The 14-day RSI is 72.30%.
- The Reuters poll of analysts and traders is predicting that the EIA will report a 2.695 million barrel build in U.S. gasoline stocks for the week ending January 8.
- Yesterday afternoon an industry group reported that U.S. gasoline inventories rose 1.88 million barrels last week.
Propane
- Propane prices are moving higher again this morning. At last look Conway was up $0.0300, trading at $0.8800. Mt Belvieu was up $0.0225, trading at $90.00.
- An OPIS survey of traders and analysts is anticipating that the EIA will report a 4.13 million barrel draw in U.S. propane stocks last week.
- IHS Markit is expecting a 4.52 million barrel draw in propane stocks.
Natural Gas
- The February Natural Gas contract is trading $0.002 higher at $2.755. The 20-day and 100-day moving averages are $2.632 and $3.023, respectively. The 14-day RSI is 55.41%.
- Tomorrow the EIA will release its Weekly Natural Gas Storage Report. Industry expectations are calling for a 126 Bcf draw in U.S. Natural Gas stocks for the week ending January 8.
