Outlook: The energy complex has been slightly mixed this morning as crude and products have traded both sides of even. RBOB and ULSD have more recently pushed further into positive territory while nearby crude hovers around even on the day. Putting some pressure on the complex this morning comes from renewed lockdowns in Hong Kong due to increased Covid-19 cases. Lockdowns in Europe have also pressured investor sentiment, as the demand outlook remains to be weak for Q1 of 2021. Stimulus negotiations here in the U.S. are set to ramp up this week, as lawmakers from both parties have expressed some concerns about the $1.9 trillion stimulus package that the Biden administration has proposed. Calls for a more limited bill that focuses mainly on increased stimulus checks and funding for vaccine distribution are also coming from both sides of the aisle. The Biden administration has promised an aggressive stimulus agenda to combat the economic effects of the pandemic. Negotiations will be watched closely going forward as the pandemic continues to rage on here in the U.S. and globally. The U.S. is recording at least 170,000 new Covid-19 cases and around 3,000 virus related deaths each day. Moderna is said to be working on a Covid booster shot for the South African variant. Moderna has stated that its current vaccine appears to work against both the South African and U.K. strains. Equities are also having a rocky start to the trading session, as all three major averages have fallen well below even.
Crude
- According to data from Petro-Logistics, OPEC crude oil supply in January is expected to decrease by approximately 400,000 bpd due to lower supply from African members. They also have reported that OPEC compliance will be close to 100% in January.
- Barclays Banks has raised its full-year 2021 crude oil forecasts by an average of $2 per barrel. The bank cited a few bullish factors such as colder than normal weather in Asia and a weak dollar as the reasons for the increased forecast. Barclays predicts that Brent crude will average $55 in 2021, with a peak of $61 in Q4. They also estimate that WTI will trade at about a $3.30 discount to Brent, with an average of just under $52 for the year.
- The CFTC’s Weekly Commitments of Traders report was released this morning for the week ending January 19. They showed that funds and money managers sold 13,414 crude oil contracts, reducing net length to 543,716 lots.
- On Friday Baker Hughes reported that U.S. producers added another 2 oil rigs last week, bringing the total up to 289. Rig counts have risen steadily for every week since November 20, and have increased nearly every week since September 18. Despite the steady rise, oil rigs are still down 416 from last year at this time.
- The March crude oil contract is trading $0.23 lower at $52.03. The 20-day and 100-day moving averages are $51.08 and $44.27, respectively. The 14-day RSI is 62.43%.
- As of 10:19 am CST: March Brent is down $0.21 at $55.20, the U.S. dollar index is 0.272 higher at 90.510, while the nearby e-mini S&P 500 futures contract is down 39.75 points at 3,791.50.
Diesel
- The February ULSD contract is trading $0.0063 higher at $1.5823. The 20-day and 100-day moving averages are $1.5499 and $1.3197, respectively. The 14-day RSI is 62.95%.
- Retail diesel fuel averaged $2.55 per gallon in 2020, according to AAA. That was the lowest yearly average price in 4 years. The EIA has forecast that retail diesel fuel will average $2.71 per gallon in 2021.
- The CFTC’s Weekly Commitments of Traders Report was released this morning. They showed that funds and money managers purchased 3,248 Heating Oil contracts, increasing net length to 12,615 lots.
Gasoline
- The February RBOB contract is trading $0.0103 higher at $1.5590. The 20-day and 100-day moving averages are $1.4740 and $1.2441, respectively. The 14-day RSI is 63.81%.
- The national average gasoline and diesel prices in 2020 were the lowest since 2016, according to data from AAA. Gasoline averages $2.17 per gallon last year. The EIA expects gasoline to average $2.42 per gallon in 2021.
- The CFTC’s Weekly Commitments of Traders Report showed that funds and money managers sold 2,393 RBOB contracts in the week ending January 19. Funds are net long 82,583 contracts.
Propane
- Propane prices have moved higher this morning. At last look Conway was up $0.0100, trading at $0.8500. Mt Belvieu was up $0.0225, trading at $0.8900.
- On Friday the EIA released its Weekly Petroleum Status Report and showed that U.S. propane inventories fell 6.230 million barrels in the week ending January 15. Despite the large draw, propane markets fell significantly last week. Strong exports and somewhat robust U.S. demand were the drivers of the rapid price increase, but rumors of export cargoes being cancelled in February along with mild weather have pressured prices.
Natural Gas
- The February Natural Gas contract is trading $0.106 higher at $2.552. The 20-day and 100-day moving averages are $2.594 and $2.976, respectively. The 14-day RSI is 45.15%.
- Natural gas futures have jumped higher this morning as somewhat colder weather and strong exports have helped buoy prices. The amount of natural gas moving to export plants has averaged 10.4 bcfd in January, according to data from Reuters. That is just off December’s monthly record high of 10.7 bcfd.
- The CFTC’s Weekly Commitments of Traders Report showed that funds and money managers purchased 3,183 Natural Gas contracts, increasing net length to 13,178 lots.
- On Friday the EIA reported that U.S. natural gas inventories fell 187 Bcf in the week ending January 15, which was a slightly larger draw than anticipated. Natural gas stocks are 198 Bcf above the five-year average.
The largest oil companies in the world dramatically lowered spending in 2020 due to the pandemic. Acquisitions of new exploration licenses for the five companies below dropped to the lowest level in at least five years, according to data from Reuters.
