Outlook: The energy complex has been mixed this morning, with crude and products trading both sides of even. Pressuring the complex this morning is stemming from weakness in equities. All three major averages have sold off and are trading well below even. The Nasdaq Composite hit its lowest level since late January earlier in the session. The fundamental picture in energy remains quite bullish despite the selloff in equities today. Yesterday analysts at Goldman Sachs raised their Brent crude oil price forecast by $10 in Q2 and Q3. Goldman Sachs is estimating that Brent will reach $70 per barrel in Q2, and $75 per barrel in Q3. Morgan Stanley has also raised its price estimate. They expect Brent to hit $70 per barrel in Q3, citing falling Covid-19 cases, improved vaccine rollouts, and inventories that are continuing to draw down. In regards to vaccine distribution, manufacturers of the vaccines have said that that they are dramatically increasing production next month, according to CNBC. Pfizer expects to provide over 13 million doses of its two-shot vaccine per week by mid-March, which is more than double what it is currently producing. Moderna is aiming to deliver 40 million doses of its two-dose vaccine per month by April, which is also nearly double what they are currently shipping out. Later this afternoon an industry group will release its weekly inventory report. Tomorrow the EIA will release its Weekly Petroleum Status Report. With the production and refinery issues in Texas and along the Gulf Coast that were caused by the bitter cold last week, it is likely we’ll see large draws once again this week.
Crude
- U.S. Federal Reserve Chairman Jerome Powell spoke to members of Congress this morning. He stated that inflation and employment remain well below the FED’s goals, meaning that the current monetary policy will remain in place.
- The House Budget Committee has advanced the $1.9 trillion stimulus bill, setting it up to be voted on later this week. The relief bill is expected to pass along party lines, with a vote likely coming on Friday or Saturday. Once passed through the House, it will be sent to the Senate, where it is expected to face a new round of hurdles. Senate Majority Leader Chuck Schumer has stated that the Senate will work quickly to pass the bill before unemployment benefits expire in mid-March.
- The Reuters poll of analysts and traders is estimating that the EIA will report a 5.372 million barrel draw in U.S. crude oil stocks for the week ending February 19.
- The April crude oil contract is trading $0.28 lower at $61.42. The 20-day and 100-day moving averages are $57.11 and $47.56, respectively. The 14-day RSI is 72.87%. An RSI above 70% indicates an overbought market from a technical perspective.
- As of 10:12 am CST: April Brent is up $0.02 at $65.25, the U.S. dollar index is 0.181 lower at 90.183, while the nearby e-mini S&P 500 futures contract is down 26.50 points at 3,876.25.
Diesel
- The March ULSD contract is trading $0.0061 lower at $1.8525. The 20-day and 100-day moving averages are $1.7316 and $1.4319, respectively. The 14-day RSI is 80.80%.
- The Reuters poll of analysts and traders is predicting that the EIA will report a 3.905 million barrel draw in U.S. distillate stocks for the week ending February 19.
Gasoline
- The March RBOB contract is trading $0.0010 lower at $1.8407. The 20-day and 100-day moving averages are $1.6814 and $1.3640, respectively. The 14-day RSI is 80.50%.
- The Reuters poll of analysts and traders is estimating that the EIA will report a 3.427 million barrel draw in U.S. gasoline stocks for the week ending February 19.
- Tesla stock has fallen dramatically in the last two sessions. Shares of the electric automobile producer fell as much as 13% in pre-market trading. Shares are currently down about 8%. Tesla has turned negative for 2021.
Propane
- Propane prices are moving higher this morning. At last look Conway was up $0.0625, trading at $1.1725. Mt Belvieu was up $0.0150, trading at $0.9600.
- The 6-10 day and 8-14 day forecasts from the NOAA are showing a high probability of warmer than average temperatures for much of the country. Home heat demand for propane is likely to continue to contract. Despite the demand for propane likely falling, inventory levels are quite low, which should provide a layer of support for prices.
Natural Gas
- The March Natural Gas contract is trading $0.080 lower at $2.873. The 20-day and 100-day moving averages are $2.878 and $2.845, respectively. The 14-day RSI is 50.23%.
- The Reuters estimate for the Weekly Natural Gas Storage Report from the EIA is predicting a 349 bcf draw for the week ending February 19. The Report will be released on Thursday at 9:30am CST.
With the production and refining issues experienced throughout last week in Texas and parts of the Gulf Coast, we should expect to see large inventory draws once again this week. It may take a couple of weeks for refineries and crude producers in the region to be able to restart operations. Inventories are likely to continue to push lower, providing an additional layer of support for prices.
