Outlook: The energy complex has been slightly mixed this morning as crude has traded both sides of even, but has recently pushed further into negative territory. Pressuring the market lower this morning comes from mounting Covid-19 cases and more stringent lockdowns in Europe and China. Demand concerns continue to plague market sentiment. China reported its first death from Covid since May as World Health Organization officials have arrived in the country. The WHO investigators arrived in Wuhan and will study the origins of the virus alongside Chinese scientists. Also putting pressure on the complex this morning comes from poor jobs data as reported by the U.S. Department of Labor. They showed that first-time claims rose the most since August. Preventing steeper losses is supportive EIA data released yesterday that showed that U.S. crude stocks fell 3.246 million barrels last week, which was mostly inline with industry expectations. Providing an additional layer of support is the news that Johnson & Johnson’s one dose coronavirus vaccine is safe and appears to generate the immune response necessary to be a viable vaccine. Johnson & Johnson will release results from its 45,000 person phase three trial later this month. If all things go according to plan, J&J will aim to provide at least 1 billion doses of the vaccine by the end of 2021. Johnson & Johnson is using the same technologies it used to develop its Ebola vaccine, according to a CNBC report. Equities are stronger to start the day as investors have their eyes on an announcement from the Biden administration. President-elect Joe Biden is reportedly planning another stimulus package that would exceed $1 trillion, and could be as high as $2 trillion. The soon to be announced stimulus bill is likely to contain language that would increase direct payments by $1,400.
Crude
- This morning the U.S. Department of Labor reported that first time claims for unemployment insurance rose to 965,000 last week. Economists polled by Dow Jones estimated a reading of 800,000. The week prior first time claims totaled 784,000. Continuing claims were also higher, rising 199,000 to 5.27 million.
- OPEC compliance data was released this morning. According to a report from OPIS, OPEC production rose in December by 280,000 bpd to an average 25.35 million bpd.
- China’s crude imports in 2020 rose 7.3% when compared to the year prior. Chinese crude oil imports averaged 10.85 million bpd in 2020.
- OPEC has forecast that U.S. shale will recover further in the second half of 2021, with production rising by 370,000 bpd. The previous forecast had U.S. total oil production increasing just 71,000 bpd this year.
- The February crude oil contract is trading $0.31 lower at $52.60. The 20-day and 100-day moving averages are $49.60 and $43.51, respectively. The 14-day RSI is 72.15%. An RSI above 70% represents an overbought market from a technical perspective.
- As of 9:52 am CST: March Brent is down $0.59 at $55.47, the U.S. dollar index is 0.063 higher at 90.418, while the nearby e-mini S&P 500 futures contract is up 10.5 points at 3,814.25.
Diesel
- The February ULSD contract is trading $0.0079 lower at $1.5910. The 20-day and 100-day moving averages are $1.5177 and $1.3035, respectively. The 14-day RSI is 73.39%.
- Yesterday the EIA reported that U.S. distillate inventories rose 4.787 million barrels in the week ending January 8. Distillate demand rose significantly however, increasing by 668,000 bpd to 3.609 million bpd.
Gasoline
- The February RBOB contract is trading $0.0236 lower at $1.5252. The 20-day and 100-day moving averages are $1.4296 and $1.2280, respectively. The 14-day RSI is 69.80%.
- Yesterday morning the EIA reported that U.S. gasoline inventories rose 4.397 million barrels last week. Rising product inventories can be attributed to rising U.S. refining capacity along with relatively weak demand. Gas demand did rise by 91,000 bpd last week, but is still down about 10% from normal levels.
Propane
- Propane prices are moving higher again this morning. At last look Conway was up $0.0275, trading at $0.9300. Mt Belvieu was up $0.0275, trading at $94.75.
- Yesterday morning the EIA reported that U.S. propane inventories fell a massive 6.729 million barrels in the week ending January 8. They also reported that propane demand rose 402,000 bpd to 2.104 million bpd. Strong exports along with decent U.S. demand continue to support prices.
Natural Gas
- The February Natural Gas contract is trading $0.003 lower at $2.724. The 20-day and 100-day moving averages are $2.634 and $3.018, respectively. The 14-day RSI is 55.04%.
- This morning the EIA released its Weekly Natural Gas Storage Report. They showed that working gas in storage fell 134 Bcf in the week ending January 8. Natural gas stocks are 126 Bcf higher than last year at this time, and 218 Bcf above the five year average.
- Traders and analysts had estimated that the EIA would report about a 125 Bcf draw in natural gas stocks.
