Outlook: The energy complex has pushed into negative territory this morning as weak jobs data reported by the U.S. Department of Labor, along with mounting Covid concerns have pressured the market lower. Brent and WTI are poised for their first weekly decline in three weeks. A resurgence in Covid-19 cases around the world, along with mutations of the virus that are reportedly much more contagious, combined with a delayed vaccine rollout have made the demand outlook a bit more worrisome. All of that combined with refreshed and stricter lockdown measures in parts of Europe and China will continue to weigh on the complex. Preventing steeper losses comes in the form of an announcement yesterday evening from the Biden administration. As I’ve previously mentioned, now that both Democratic challengers won their respective Senate runoff races in Georgia, it is likely that President-elect Joe Biden and his administration will pursue a much more aggressive stimulus agenda. Yesterday evening he outlined a $1.9 trillion stimulus package proposal. The aid package includes $415 billion to help the rollout of vaccines, around $1 trillion in direct relief to households, and another $440 billion for small businesses and state and local governments. Despite the larger than anticipated proposal, equities have fallen off to start the morning. All three major averages are trading below even, and all three are poised for a weekly loss.
Crude
- Total has become the first major energy company to quit the U.S. oil and gas lobby due to disagreements over climate policies and drilling regulations, according to a Reuters report. Total said that it will not renew its membership with the American Petroleum Institute in 2021. Total reportedly disagrees with the API’s support for a rollback of emissions regulations, as well as how to assign a price for carbon. The Biden administration is expected to make a strong push for greener technologies and bring the U.S. to net zero emissions by 2050.
- The Trump administration has added China’s CNOOC to a U.S. economic blacklist yesterday. The U.S. Commerce Department has accused CNOOC of helping Beijing intimidate neighbors in the South China Sea.
- The U.S. Bureau of Land Management auctioned off oil and gas leases in four states yesterday. Most of the nearly 6,900 acres offered were in New Mexico, which would fall in the Permian Basin. The average bid was $656 per acre in New Mexico. Costs per acre averaged almost $5,000 before the pandemic.
- The February crude oil contract is trading $1.44 lower at $52.13. The 20-day and 100-day moving averages are $49.84 and $43.60, respectively. The 14-day RSI is 63.77%.
- As of 10:24 am CST: March Brent is down $1.68 at $54.74, the U.S. dollar index is 0.466 higher at 90.705, while the nearby e-mini S&P 500 futures contract is down 37.50 points at 3,755.00.
Diesel
- The February ULSD contract is trading $0.0396 lower at $1.5798. The 20-day and 100-day moving averages are $1.5237 and $1.3062, respectively. The 14-day RSI is 64.57%.
- According to TSA checkpoint data, 803,688 passengers went through U.S. airport security on Thursday. That compares to over 2.2 million on the same day in 2020, which represents about a 65% drop in demand.
Gasoline
- The February RBOB contract is trading $0.0308 lower at $1.5231. The 20-day and 100-day moving averages are $1.4391 and $1.2313, respectively. The 14-day RSI is 66.10%.
- The EPA is expected to seek comments today on a potential general waiver that would exempt oil refiners from biofuel blending obligations due to the pandemic, according to a Reuters report. Renewable Identification Numbers, or RINs, in a very general sense are credits that can be bought and sold for compliance purposes. The value of D6 ethanol RINs and D4 biodiesel RINs have recently touched highs not seen since 2017.
Propane
- Propane prices are moving higher again this morning. At last look Conway was up $0.0650, trading at $1.045. Mt Belvieu was up $0.0100, trading at $98.25.
- Propane prices have skyrocketed in recent weeks. Strong exports, steady U.S. production, falling inventories, and somewhat robust U.S. demand are continuing to provide support to the market and drive prices higher.
Natural Gas
- The February Natural Gas contract is trading $0.058 higher at $2.724. The 20-day and 100-day moving averages are $2.633 and $3.012, respectively. The 14-day RSI is 54.43%.
- Yesterday 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 218 Bcf above the five year average, but still fall within the five year historical range.
- Front month natural gas futures have jumped about 3% this morning as forecasts for colder weather and higher home heating demand have buoyed prices. Near record high exports are also providing a layer of support.
Output from OPEC+ was at a seven month high in December, dropping compliance from the broader group down to 98.5%. OPEC produced 25.43 million bpd, which was an increase of 220,000 bpd. Rising Libyan production, who are exempt from production quotas, led to the push higher in OPEC output.
