Outlook: The energy complex has been mixed throughout today’s session, as crude and ULSD trade below even, while nearby RBOB has held onto strong gains. Pressuring the complex is the news that energy companies in Texas are preparing to restart oil and gas fields that were shut down due to the frigid weather. Bitter cold temperatures froze natural gas lines and shuttered about 4 million bpd of crude oil production in the state. Preventing steeper losses this morning is bullish data from the EIA that was released yesterday morning in the Weekly Petroleum Status Report. They showed that U.S. crude and product inventories fell a combined 13 million barrels in the week ending February 12. Also lending some support this morning comes from commentary made by Treasury Secretary Janet Yellen. She stated that a large Covid-19 relief package is needed for a full economic recovery. She also added that the $1.9 trillion bill could help the U.S. get back to full employment in a year. Committees in the U.S. House of Representatives continue to meet to hash out the details of the bill. House Speaker Nancy Pelosi has stated that the House aims to pass the legislation by the end of next week. The enhanced unemployment benefit is scheduled to lapse on March 14 if no new bill were to be passed. There is added pressure to move swiftly as the U.S. Department of Labor reported that weekly jobless claims rose to 861,000 last week, well above the 773,000 estimate from Dow Jones. Equities have all started the day higher, as all three major averages are trading well above even.
Crude
- Goldman Sachs estimates that U.S. crude production will decline an average of 700,000 bpd in February due to the weather caused shut downs in Texas. Despite the large draw down in production, the bank states that lost demand will nearly offset the lost production, and they predict little to no impact on the global oil market.
- Today at noon CST Baker Hughes will release its weekly Rig Count Report. Last week they showed that U.S. producers added 7 oil rigs, bringing the total up to 306. Rigs are still down 372 when compared to last year at this time. The oil rig count has risen in 20 of the last 21 weeks.
- This afternoon the CFTC will release its weekly Commitments of Traders Report. We will go into that data on Monday morning.
- The March crude oil contract is trading $0.83 lower at $59.69. The 20-day and 100-day moving averages are $56.32 and $47.05, respectively. The 14-day RSI is 72.14%. An RSI above 70% indicates an overbought market from a technical perspective.
- As of 10:39 am CST: April Brent is down $0.35 at $63.58, the U.S. dollar index is 0.341 lower at 90.251, while the nearby e-mini S&P 500 futures contract is up 16.75 points at 3,926.25.
Diesel
- The March ULSD contract is trading $0.0025 lower at $1.8339. The 20-day and 100-day moving averages are $1.7056 and $1.4187, respectively. The 14-day RSI is 84.36%.
- U.S. diesel imports from Northern Europe are scheduled to rise to 140,000 bpd, which is a multi-year high according to Vortexa. The rise in imports comes as traders are looking to fill the gap in refining supplies with imports from other countries.
- Yesterday the EIA reported that U.S. distillate stocks fell 3.421 million barrels last week. With the drop in crude production and refining capacity due to the weather events in Texas, it’s likely we’ll continue to see distillate inventories draw down going forward.
Gasoline
- The March RBOB contract is trading $0.0246 higher at $1.8189. The 20-day and 100-day moving averages are $1.6537 and $1.3514, respectively. The 14-day RSI is 81.52%.
- Yesterday the EIA reported that U.S. gasoline inventories rose 673,000 barrels in the week ending February 12. The small build has been outweighed by a strong boost to U.S. demand for gasoline, as demand rose 550,000 bpd to 8.407 million bpd.
- Goldman Sachs has forecast that U.S. gasoline demand will contract 250,000 bpd due to blocked roads and lack of travel that have resulted from the extreme weather. The lowered gas demand outlook will likely only remain for as long as road conditions are poor.
Propane
- Propane prices are somewhat mixed this morning. At last look Conway was up $0.0400, trading at $1.2400. Mt Belvieu was down $0.0050, trading at $1.0300.
- Yesterday morning the EIA reported that U.S. propane inventories fell another 2.897 million barrels last week. The large draw came even as U.S. demand contracted 335,000 bpd, and exports shrank 48,000 bpd to 1.050 million bpd.
- Propane prices have fallen from the highs seen yesterday, as the situation in Texas is likely to be resolved in short order. There is still some fundamental strength to the market however, as inventories continue to contract and U.S. demand remains somewhat robust.
Natural Gas
- The March Natural Gas contract is trading $0.004 higher at $3.086. The 20-day and 100-day moving averages are $2.841 and $2.850, respectively. The 14-day RSI is 61.24%.
- Yesterday morning the EIA released its Weekly Natural Gas Storage Report. They showed that working gas in storage fell 237 Bcf in the week ending February 12. Natural gas stocks are 105 Bcf lower than last year at this time, but 57 Bcf above the five-year average.
