Outlook: Energy futures values have pushed higher this morning as a weakening dollar and stimulus optimism have helped buoy prices. Chinese economic data released on Monday is also providing some support to the complex. China’s economy expanded by 6.5% in Q4 of 2020 when compared to the same time period the year prior. Q3 growth was reportedly at 4.9%. Total GDP for China rose 2.3% in 2020, making it the only major economy to avoid a contraction last year. According to a Reuters poll, China’s GDP is set to expand at the fastest pace in a decade at 8.4% in 2021. Despite the uptick in Chinese economic activity, and the continued push higher in energy futures values, the International Energy Agency has forecast that oil demand will take another hit from a resurgence in Covid cases. The IEA stated in its monthly report that the current curtailments that have been put in place, such as border closures and lockdown measures, will likely continue to put pressure on fuel demand until vaccines are more widely distributed. The IEA has lowered its demand forecast for the first quarter of this year by 580,000 bpd. They have also reduced the total demand outlook for 2021 by 300,000 bpd. Equities are seeing a big jump this morning as earnings season is underway. Goldman Sachs Q4 earnings beat estimates and have helped push equities higher this morning as all three major averages are trading well above even.
Crude
- OPEC’s Secretary General Mohammed Barkindo spoke at a virtual conference today and said that he was “cautiously optimistic” that the oil market would recover this year. He reiterated that monthly meetings for OPEC+ will continue and that the overall goal remains to be to provide a stable market.
- President-elect Joe Biden is expected to cancel the Keystone XL pipeline when he takes office later this week. Reuters is reporting that Biden will cancel a permit for the $8 billion project, citing concerns about fossil fuels and climate change. The pipeline would carry 830,000 bpd of oil sands from Alberta, Canada to Nebraska. Keystone XL owner TC Energy has stated that the pipeline would run fully on renewable power by 2030. The Canadian owned Trans Mountain Expansion and Enbridge Line 3 replacement projects are proceeding at this time.
- The Weekly Petroleum Status Report from the EIA will be released on Friday at 10:00am CST. The weekly inventory report from a trusted industry group that is typically released on Tuesday afternoon will be released on Wednesday due to the holiday.
- The Baker Hughes Rig Count Report will be released on Friday. The CFTC's Commitments of Traders Report will be released next week Monday.
- On Friday afternoon the CFTC released its Weekly Commitments of Traders Report and showed that funds and money managers purchased 10,891 crude oil contracts, increasing net length to 557,130 lots.
- The February crude oil contract is trading $0.67 higher at $53.03. The 20-day and 100-day moving averages are $50.08 and $43.69, respectively. The 14-day RSI is 68.56%.
- As of 10:17 am CST: March Brent is up $1.18 at $55.93, the U.S. dollar index is 0.264 lower at 90.501, while the nearby e-mini S&P 500 futures contract is up 19.25 points at 3,781.50.
Diesel
- The February ULSD contract is trading $0.0071 higher at $1.6000. The 20-day and 100-day moving averages are $1.5298 and $1.3089, respectively. The 14-day RSI is 70.15%.
- On Friday the CFTC released its Weekly Commitments of Traders Report and showed that funds and money managers sold 5,659 Heating Oil contracts, reducing net length to 9,367 lots.
- The national average price for retail diesel fuel is currently $2.625 per gallon. Prices have remained mostly flat for the last week. Prices last year at this time averaged $3.00 per gallon, according to data from AAA.
Gasoline
- The February RBOB contract is trading $0.0116 higher at $1.5400. The 20-day and 100-day moving averages are $1.4477 and $1.2345, respectively. The 14-day RSI is 69.89%.
- Last Friday the CFTC released its Weekly Commitments of Traders Report and showed that funds and money managers bought 1,349 RBOB contracts, increasing overall net length to 84,976 lots.
- The national average price for retail gasoline is currently $2.389 per gallon, according to data from AAA. Despite the steady uptick in gasoline prices, values are still well below last year at this time, as gas prices averaged $2.550 at this time in 2020.
Propane
- Propane prices are moving lower this morning. At last look Conway was down $0.0300, trading at $1.0200. Mt Belvieu was down $0.0275, trading at $0.9225.
- Conway propane values have cooled slightly this morning after the rapid increase in values last week. Colder weather in Asian markets, along with somewhat strong demand here in the U.S. have helped push prices rapidly higher.
Natural Gas
- The February Natural Gas contract is trading $0.182 lower at $2.553. The 20-day and 100-day moving averages are $2.629 and $3.006, respectively. The 14-day RSI is 43.84%.
- On Friday afternoon the CFTC released its Weekly Commitments of Traders Report and showed that funds and money managers purchased 14,688 natural gas contracts, moving to a net length position of 9,995 lots.
- Mild weather forecasts have pushed natural gas futures lower this morning. Nearly record high exports due to strong overseas demand should help prevent steeper losses however.
The IEA has forecast that demand will fall nearly 600,000 bpd in Q1 of 2021, and 300,000 bpd overall this year. They have also forecast that supply and demand will reach equilibrium in Q2 of 2021, before demand takes off and outpaces supply in the latter half of the year.
