Outlook: The energy complex has pressed higher this morning as cold weather across the country has pushed crude above $60 per barrel for the first time since January 2020. Strength in crude has tapered off a bit, but product markets remain well above even on the day. The deep freeze has left millions without power, and has shut several oil wells and refineries in southern states. The largest refinery in the U.S., Motiva’s 607,000 bpd Port Arthur, Texas facility, has been shut down due to the rolling blackouts and extreme temperatures. Refineries in Texas that are owned by Valero, Total, Exxon, and Citgo are all experiencing similar shutdowns. Texas produces just over 4.5 million barrels of crude oil per day. Power shortages are anticipated to last through today, but warmer weather is on the horizon. Providing an additional layer of support comes from more positive Covid-19 data. According to data from Johns Hopkins University, the seven-day average of new Covid-19 cases fell 23% when compared to the week prior. The seven-day average is showing about 85,000 new cases each day. Moderna is expecting to deliver 100 million doses of its two-dose vaccine by the end of March, according to an update from the company. Moderna will provide another 100 million doses by the end of May, and the final 100 million by the end of July. Equities started the day higher but have since been a bit mixed, as the DJIA and the Nasdaq Composite have held onto small gains, while the S&P 500 has traded both sides of even. Bitcoin has surpassed $50,000 for the first time ever today.
Crude
- Both Goldman Sachs and JPMorgan are predicting a supercycle in the energy complex. Analysts at each respective company have stated that when the pandemic subsides, crude oil prices could soar, with JPMorgan stating that $100 per barrel crude or higher is a possibility.
- UBS has raised its crude oil forecasts by $5 per barrel, with Brent increasing to $65 per barrel by the summer, and $68 per barrel in the latter half of the year. They’ve also predicted that Brent would hit $70 per barrel by March of 2022. WTI is currently about $3 per barrel less than Brent and is expected to maintain around a similar spread for the year and into 2022.
- On Friday afternoon the CFTC released its weekly Commitments of Traders report. They showed that funds and money managers purchased 24,030 crude oil contracts, increasing net length to 560,672 lots.
- On Friday afternoon Baker Hughes released its weekly Rig Count report. They reported that U.S. producers added 7 oils rigs, bringing the total up to 306. Producers have added rigs in 20 of the last 21 weeks.
- The Weekly Petroleum Status Report from the EIA will be released on Thursday at 10:00am CST due to the Presidents Day holiday on Monday.
- The March crude oil contract is trading $0.40 higher at $59.87. The 20-day and 100-day moving averages are $55.21 and $46.47, respectively. The 14-day RSI is 80.48%. An RSI above 70% indicates an overbought market from a technical perspective.
- As of 10:04 am CST: April Brent is down $0.25 at $63.05, the U.S. dollar index is 0.069 higher at 90.549, while the nearby e-mini S&P 500 futures contract is down 2.00 points at 3,929.00.
Diesel
- The March ULSD contract is trading $0.0374 higher at $1.8088. The 20-day and 100-day moving averages are $1.6697 and $1.3991, respectively. The 14-day RSI is 82.48%.
- On Friday the CFTC reported in its weekly Commitments of Traders report that funds and money managers sold 5,191 heating oil contracts, reducing net length to 13,828 lots.
Gasoline
- The March RBOB contract is trading $0.0596 higher at $1.7521. The 20-day and 100-day moving averages are $1.6124 and $1.3327, respectively. The 14-day RSI is 80.25%.
- The latest Commitments of Traders report from the CFTC showed that funds and money managers bought 122 RBOB contracts in the week ending February 9, increasing net length to 69,263 lots.
- Production of the Ford F-150 will be shut down for a full week at the company’s Missouri facility. Due to the bitter cold temperatures, Ford was warned that the availability of natural gas could be restricted in the Kansas City area for the next few days. The announcement comes as Ford has had to cut production due to a global shortage of semiconductors. The F-150 is the biggest revenue generator for Ford. The pickup is second only to the Apple iPhone in terms of branded consumer product sales, according to analysis from the Boston Consulting Group.
Propane
- Propane prices have moved aggressively higher this morning. At last look Conway was up $0.1900, trading at $1.1300. Mt Belvieu was up $0.0900, trading at $1.0000.
- Due to the unprecedented situation in Texas, as well as frigid weather throughout much of the country, propane prices have risen dramatically today. Conway traded as high as $1.24 earlier in the session. I would anticipate prices to fall back to more normal levels once the situation settles down. Both the 6-10 day and 8-14 day forecast from the NOAA is showing a return to average temperatures throughout the majority of the country.
Natural Gas
- The March Natural Gas contract is trading $0.140 higher at $3.052. The 20-day and 100-day moving averages are $2.747 and $2.852, respectively. The 14-day RSI is 65.49%.
- The CFTC’s Commitments of Traders report showed that funds and money managers purchased 6,795 natural gas contracts in the week ending February 9, increasing net length to 36,609 lots.
According to data from PowerOutage.us, over 4.1 million customers in Texas were experiencing power outages as of 2:05am EST this morning. Demand for energy has outstripped supply due to the bitter cold in the region, which has caused prices to skyrocket.
