Morning Highlights
Morning Highlights

1.27.21 Energy markets have opened slightly weaker this morning as demand concerns due to lockdowns in China and parts of Europe have put pressure on the complex

Ryan Kaup

Jan 27, 2021

Outlook: Energy markets have opened slightly weaker this morning as demand concerns due to lockdowns in China and parts of Europe have put pressure on the complex. A tightening supply scenario is limiting steeper losses however. Yesterday afternoon an industry group reported that U.S. crude inventories fell 5.3 million barrels in the week ending January 22. This morning traders will look towards government stats provided by the EIA in the Weekly Petroleum Status Report for confirmation of the data. The Reuters poll of analysts and traders is estimating that the EIA will report a 43,000 barrel build in U.S. crude oil stocks. A U.S. appeals court upheld a lower court’s decision to throw out a key federal permit for the Dakota Access crude oil pipeline. The removal of the permit raises the chances that the 557,000 bpd pipeline will be shutdown pending an environmental review. The line carries crude from North Dakota’s Bakken field, which is the second-largest shale play in the country. The Dakota Access Pipeline will remain open for now, as the same appeals court disagreed with the lower court’s decision in regards to shutting down operations. Equities are off to a rocky start, as all three major averages are trading well below even. Weak earnings from Boeing and AMD have pressured equities lower this morning.

 

Crude

 

  • President Biden will reportedly announce today a new batch of executive orders that will target combatting climate change. An executive order to pause new oil and gas leases on federal land is also likely. Crude oil production on federal land makes up about 25% of total U.S. crude oil output. Existing leases seem like they will remain valid at this time.
  • Iranian crude oil exports are continuing to rise despite aggressive U.S. sanctions. According to a Reuters report, Iranian crude exports increased to 710,000 bpd in December, which was up from about 490,000 in October. Shipments and production are reportedly rising even further in January. The Iranian government has suggested a willingness to rejoin the 2015 Nuclear Accord that was achieved under the Obama administration. If the agreement were reinstated, it would be under the pretense that U.S. sanctions would be removed so long as Iran halted its Nuclear program.
  • According to an OPIS report, Los Angeles International Airport total passenger traffic volumes for 2020 were 67% below 2019 levels. Total passenger traffic totaled 28.8 million last year, down from 2019’s 88 million passengers. Just in December 2020 alone passenger traffic was down 74% from the year prior. A recovery in airline travel demand is going to be contingent on vaccine distribution and reopened economies.
  • The March crude oil contract is trading $0.36 lower at $52.25. The 20-day and 100-day moving averages are $51.53 and $44.44, respectively. The 14-day RSI is 58.52%.
  • As of 9:14 am CST: March Brent is down $0.22 at $55.69, the U.S. dollar index is 0.609 higher at 90.771, while the nearby e-mini S&P 500 futures contract is down 54.25 points at 3,788.25.

 

Diesel

 

  • The February ULSD contract is trading $0.0059 lower at $1.5925. The 20-day and 100-day moving averages are $1.5615 and $1.3259, respectively. The 14-day RSI is 63.25%.
  • The Reuters poll of analysts and traders is estimating that the EIA will report a 361,000 barrel draw in U.S. distillate stocks for the week ending January 22.
  • Yesterday afternoon an industry group reported that U.S. distillate stocks rose 1.4 million barrels last week.

 

Gasoline

 

  • The February RBOB contract is trading $0.0086 lower at $1.5721. The 20-day and 100-day moving averages are $1.5056 and $1.2557, respectively. The 14-day RSI is 71.10%. 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 1.764 million barrel build in U.S. gasoline stocks for the week ending January 22.
  • Yesterday afternoon an industry group reported that U.S. gasoline inventories rose by 3.1 million barrels.

 

Propane

 

  • Propane prices are slightly mixed this morning. At last look Conway was down $0.0050, trading at $0.8200. Mt Belvieu was up $0.0275, trading at $0.9075.
  • According to an OPIS survey of analysts and traders, U.S. propane inventories likely fell by 3.07 million barrels in the week ending January 22. The poll ranges from draws of 5.55 million to a 400,000 barrel build.
  • IHS Markit estimates that U.S. propane inventories fell by 4.255 million barrels last week.

 

Natural Gas

 

  • The February Natural Gas contract is trading $0.051 higher at $2.707. The 20-day and 100-day moving averages are $2.622 and $2.963, respectively. The 14-day RSI is 53.57%.
  • The Weekly Natural Gas Storage Report from the EIA will be released tomorrow morning.
  • Natural gas futures have jumped to a one week high as forecasts for somewhat colder weather through the middle of February have buoyed prices.

 

Tesla is scheduled to report fourth-quarter earnings today. Attention will be focused on the delivery outlook for 2021. Industry expectations are calling for total vehicles delivered to be around 800,000 in 2021, and over 1 million in 2022. Analysts are expecting the company’s quarterly revenue to exceed $10 billion for the first time, according to Bloomberg.