Outlook: The energy complex has been slightly mixed this morning as nearby crude has traded both sides of even, while product markets hold onto moderate gains. The International Monetary Fund has increased its global economic growth outlook for 2021 to 5.5%. The most recent forecast from the IMF shows an increase of 0.3% from the October prediction. The IMF cited the effects of the various vaccines as the growth driver, but “exceptional uncertainty” still remains. The IMF also mentioned that policy measures in the U.S., Japan, and other large economies would help drive growth. Democrats in the House and Senate are planning to bring forth the $1.9 trillion stimulus proposal that the Biden administration announced a couple of weeks ago. The proposal has met some criticism from both sides of the aisle, in what could perhaps be another lengthy and drawn out battle to get the next stimulus bill passed. A standalone bill that calls for increased stimulus checks to those that qualify, and funding for the distribution and administration of vaccines is likely to gain enough bipartisan support to move quickly through both chambers of Congress however. January 28 marks the start of the Lunar New Year. The holiday lasts for 40 days and typically causes the largest movement of people on the planet. Millions of people in China travel to see their extended families during this time. Due to the pandemic and increased lockdown measures, travel during this years Lunar New Year is expected to be about 40% below 2019 levels. Equities are having a bit of a mixed start to the day as all three major averages have traded both sides of even.
Crude
- According to tanker tracker Petro-Logistics, OPEC+ compliance is averaging 85% so far in January. The broader group pledged to increase production by 500,000 bpd in January. Supply disruptions from Libya, Iraq, and Nigeria are likely to put OPEC compliance near 100% for the month.
- This afternoon an industry group will release its weekly inventory report. Tomorrow the EIA will release the Weekly Petroleum Status Report. The Reuters poll of analysts and traders is estimating that the EIA will report a 603,000 barrel build in U.S. crude oil inventories for the week ending January 22.
- The Minnesota Department of Health said yesterday that it had confirmed the first known U.S. case of the more contagious coronavirus variant that was originally found in Brazil.
- According to a New York Times report, President Biden is expected to announce on Wednesday that the administration will begin taking steps to ban oil drilling on federal land. Biden will reportedly issue an executive order that would direct federal agencies to determine how expansive the ban should be. Federal leases account for about 25% of total crude oil output, according to a calculation from Reuters.
- The March crude oil contract is trading $0.09 lower at $52.68. The 20-day and 100-day moving averages are $51.31 and $44.35, respectively. The 14-day RSI is 62.57%.
- As of 9:35 am CST: March Brent is up $0.06 at $55.94, the U.S. dollar index is 0.213 lower at 90.178, while the nearby e-mini S&P 500 futures contract is down 0.50 points at 3,848.00.
Diesel
- The February ULSD contract is trading $0.0053 higher at $1.5992. The 20-day and 100-day moving averages are $1.5560 and $1.3227, respectively. The 14-day RSI is 66.02%.
- India’s crude oil imports rose to the highest level in more than two years in December 2020, according to data from India’s Ministry of Petroleum and Natural Gas. Crude imports rose to 20.49 million tonnes last month, or just over 150 million barrels. Crude oil processing also jumped higher last month, increasing to its first year-on-year gain since February 2020.
- The Reuters poll of analysts and traders is estimating that the EIA will report a 182,000 barrel draw in U.S. distillate stocks for the week ending January 22.
Gasoline
- The February RBOB contract is trading $0.0199 higher at $1.5810. The 20-day and 100-day moving averages are $1.4951 and $1.2518, respectively. The 14-day RSI is 74.13%. An RSI above 70% indicates an overbought position from a technical standpoint.
- The Reuters poll of analysts and traders is estimating that the EIA will report 1.713 million barrel build in U.S. gasoline stocks for the week ending January 22.
Propane
- Propane prices have moved higher this morning. At last look Conway was up $0.0125, trading at $0.8400. Mt Belvieu was up $0.0050, trading at $0.8875.
- Mild weather may begin to have a larger effect on U.S. propane prices now that the export frenzy has slowed. The NOAA is showing in its 6-10 day forecast that temperatures throughout much of the country are expected to be much warmer than normal, particularly in the Midwest. Low U.S. inventories should prevent any steep setback in the nearby months however.
Natural Gas
- The February Natural Gas contract is trading $0.028 higher at $2.630. The 20-day and 100-day moving averages are $2.602 and $2.969, respectively. The 14-day RSI is 49.34%.
- According to the International Energy Agency, global gas demand is expected to increase by 2.8% this year, which would put it near 2019 levels. Consumption in 2020 fell by an estimated 100 bcm due to mild weather and the pandemic.
India is the third largest importer of crude oil in the world. In December 2020, crude oil imports averaged about 4.8 million bpd, the highest level seen since October 2018. Refiners in India operated at an average rate of 99.1% in December. High imports and high processing rates would suggest that fuel demand in the country is set to leap higher.
