Outlook: The energy complex has pushed higher as President-elect Joe Biden is set to be sworn into office later this morning. The inauguration will be mostly virtual due to the pandemic but will still feature several ceremonial events and celebrations. The change in administration is helping give a boost to investor sentiment in both energy and equity markets. Additional stimulus measures are likely to be pursued and delivered upon as Democrats hold the thinnest of majorities in the House and Senate. Bipartisan support for larger stimulus checks does exist however. Yesterday U.S. Treasury Secretary nominee Janet Yellen pressed members of Congress to “act big” on pandemic relief. The Biden administration has already set forth a $1.9 trillion stimulus package. The “American Rescue Plan” calls for sending an additional $1,400 per person to eligible recipients, enhanced unemployment aid, more assistance for small businesses, and a litany of other proposals. Comments made by Yellen, along with the prospects for further stimulus have pressured the dollar lower and provided an additional boost to the energy complex. More dollars in circulation would likely weaken the value of the dollar and cause dollar denominated commodities to increase in value. Equities are ripping higher this morning. All three major averages are well above even, with the S&P 500 and Nasdaq Composite hitting intraday all-time highs.
Crude
- The Weekly Petroleum Status Report from the EIA will be released on Friday at 10:00am CST due to the MLK holiday on Monday and Inauguration Day today. Early estimates are calling for a 280,000 barrel draw in U.S. crude oil stocks for the week ending January 15. This afternoon an industry group will release its weekly inventory report.
- U.S. crude oil production from major shale formations is expected to fall for the fourth straight month. According to the EIA’s monthly forecast, shale production is anticipated to fall to about 7.52 million bpd in February, which is a decline of about 90,000 bpd.
- As a follow up to a story from yesterday, President-elect Joe Biden will revoke the presidential permit needed to build the Keystone XL pipeline, according to a Reuters report. The move will be one of 15 executive actions that will be taken shortly after being sworn into office. Keystone XL would carry 830,000 bpd of crude oil from Alberta, Canada to Nebraska.
- The February crude oil contract is trading $0.31 higher at $53.29. The 20-day and 100-day moving averages are $50.29 and $43.78, respectively. The 14-day RSI is 69.66%.
- As of 10:00 am CST: March Brent is up $0.34 at $56.24, the U.S. dollar index is 0.061 lower at 90.442, while the nearby e-mini S&P 500 futures contract is up 43.00 points at 3,833.50.
Diesel
- The February ULSD contract is trading $0.0058 higher at $1.6045. The 20-day and 100-day moving averages are $1.5343 and $1.3115, respectively. The 14-day RSI is 70.64%. An RSI above 70% indicates an overbought market from a technical perspective.
- Early industry estimates from the Reuters poll of analysts and traders is predicting that the EIA will report a 825,000 barrel build in U.S. distillate stocks for the week ending January 15. An industry group will release its weekly inventory report this afternoon, a day later than usual due to the holiday on Monday.
- Chinese exports of very low sulphur fuel oil rose to a record in a December, according to customs data. VLSFO is used to comply with emissions rules set by the International Maritime Organization.
Gasoline
- The February RBOB contract is trading $0.0140 higher at $1.5521. The 20-day and 100-day moving averages are $1.4556 and $1.2377, respectively. The 14-day RSI is 70.95%.
- The Reuters poll of analysts and traders is estimating that the EIA will report a 3.0 million barrel build in U.S. gasoline stocks for the week ending January 15.
- The U.S. EPA granted three waivers to refiners on Tuesday that will exempt them from biofuel blending obligations. Around 30 waiver requests remain outstanding. Obligated refiners are required to blend biofuel into their fuel mix, or purchase credits in order to remain compliant. Refiners can apply for an exemption from their obligation if they can prove that the requirements would cause them financial harm.
Propane
- Propane prices are moving lower this morning. At last look Conway was down $0.0400, trading at $0.9000. Mt Belvieu was down $0.0400 as well, trading at $0.8900.
- Propane values have taken a significant breather in the last couple of days. Conway values had increased over 50 cents since December 1. The news of some cancelled cargoes that were scheduled to ship to Asian markets has pushed values lower.
Natural Gas
- The February Natural Gas contract is trading $0.089 lower at $2.457. The 20-day and 100-day moving averages are $2.616 and $2.998, respectively. The 14-day RSI is 38.96%. An RSI at 30% or below indicates an oversold market from a technical standpoint.
- U.S. natural gas futures have fallen to a three week low as forecasts for mild weather are anticipated to pressure demand lower.
- The Weekly Natural Gas Storage Report from the EIA will be released on Friday instead of Thursday this week, due to both the MLK Holiday, and Inauguration Day.
Saudi Arabia beat Russia to remain China’s top crude supplier in 2020, according to Chinese customs data. Crude oil demand in China remained quite robust despite the pandemic. Chinese imports rose 7.3% to a record of 10.85 million bpd on average in 2020. Saudi shipments to China rose 1.9% as well, averaging 1.69 million bpd. Russia was a close second, averaging 1.67 million bpd, up 7.6% from 2019.
