Outlook: The energy complex continues to push higher this morning ahead of the Weekly Petroleum Status Report from the EIA. The report will be released at 9:30am CST. Industry expectations are calling for large draws across the board due to the winter weather that shut down production and refining capacity in Texas last week. Yesterday Federal Reserve Chairman Jerome Powell stated that the economic recovery was “far from complete” and that the future still remains uncertain. His commentary should add an additional level of support for the $1.9 trillion stimulus package that is currently making its way through committees in the U.S. House of Representatives. It is expected that the House will pass the relief measure on Friday or Saturday, where it will then head to the Senate. A more contentious negotiation of what is included in the bill is expected to take place, as Democrats hold the thinnest of majorities. In regards to Covid vaccines, the Johnson & Johnson single shot vaccine is effective at preventing moderate and severe cases of Covid-19, according to an analysis of trial data published by the FDA today. The J&J vaccine is 66% effective against the virus, and 100% effective against hospitalizations. The FDA’s Vaccines and Related Biological Products Advisory Committee is scheduled to meet on Friday, where a vote will be held on whether to recommend the Johnson & Johnson vaccine for emergency use approval. It is likely the committee will recommend the vaccine for emergency use, where it is then likely to be granted by the FDA, as they have signaled a willingness to grant any Covid-19 vaccine an emergency use authorization so long as its proven safe and is at least 50% effective. Johnson & Johnson are prepared to ship 20 million doses by the end of March, pending the approval. Equities have had a rocky start to today’s session as all three major averages are trading below even.
Crude
- Yesterday afternoon an industry group reported that U.S. crude oil stocks rose 1.03 million barrels last week. The Reuters poll of analysts and traders is estimating that the EIA will report a 5.190 million barrel draw in U.S. crude oil stocks for the week ending February 19.
- OPEC+ is scheduled to meet on March 4 to discuss production quotas for April. It is expected that Saudi Arabia will end its voluntary 1.0 million bpd at the end March. The group will also decide whether or not to increase production. Russia is pushing for increasing output by an additional 500,000 bpd.
- The value of Saudi Arabia’s oil exports fell about 30% in December, which equates to around $5.2 billion, according to data from Reuters.
- The April crude oil contract is trading $1.19 higher at $62.86. The 20-day and 100-day moving averages are $57.64 and $47.77, respectively. The 14-day RSI is 77.08%. An RSI above 70% indicates an overbought market from a technical perspective.
- As of 9:23 am CST: April Brent is up $1.22 at $66.59, the U.S. dollar index is 0.242 higher at 90.410, while the nearby e-mini S&P 500 futures contract is down 18.75 points at 3,859.25.
Diesel
- The March ULSD contract is trading $0.0293 higher at $1.8973. The 20-day and 100-day moving averages are $1.7473 and $1.4389, respectively. The 14-day RSI is 84.71%.
- The Reuters poll of analysts and traders is predicting that the EIA will report a 3.746 million barrel draw in U.S. distillate stocks for the week ending February 19.
- Yesterday an industry group reported that distillate inventories fell 4.49 million barrels last week.
Gasoline
- The March RBOB contract is trading $0.0241 higher at $1.8827. The 20-day and 100-day moving averages are $1.6978 and $1.3711, respectively. The 14-day RSI is 84.57%.
- The Reuters poll of analysts and traders is estimating that the EIA will report a 3.062 million barrel draw in U.S. gasoline stocks for the week ending February 19.
- Yesterday afternoon an industry group reported that U.S. gasoline stocks rose 66,000 barrels last week.
- RIN prices have continued to climb in recent weeks. The value of the D6 ethanol RIN recently pushed over $1.00 per RIN. That is the highest price since 2013.
Propane
- The OPIS survey of analysts and traders is estimating that the EIA will report a 3.32 million barrel draw in U.S. propane stocks for the week ending February 19.
- IHS Markit is predicting that propane inventories fell 3.374 million barrels last week.
Natural Gas
- The March Natural Gas contract is trading $0.020 lower at $2.859. The 20-day and 100-day moving averages are $2.890 and $2.843, respectively. The 14-day RSI is 49.88%.
- 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.
Values of both D4 and D6 RINS have continued to rise. D4 RINs recently traded as high as $1.20, while the D4 ethanol RIN has traded over $1.00. RINs are used for compliance. The Renewable Fuels Standard requires obligated parties to either blend a certain amount of biofuel into their fuel, or purchase enough credits in the secondary market. Small refiners can file for an exemption if the price of RINs has caused financial harm. Those exemptions are handed out by the EPA and have been a topic of much discussion from both the corn and oil lobbying groups in Washington.
