Outlook: The energy complex has taken a bit of a breather this morning, as crude has traded both sides of even, while product markets are trading in negative territory. Despite the small setback, prices are near 13 month highs. Giving some support this morning comes from yesterday’s EIA report. They showed that U.S. crude oil production fell dramatically last week, largely due to the frigid winter weather that was experienced throughout Texas and parts of the Gulf Coast. Refinery rates also fell sharply last week. It is likely that production and refining capacity will take a few weeks, or perhaps even longer, before they return to normal. Preventing a steeper sell-off is an assurance from the U.S. Federal Reserve that interest rates will stay low for the foreseeable future, which has helped pressure the dollar lower this morning. A weak dollar typically pushes the price of crude oil higher. Next week OPEC+ will meet virtually, where the group will discuss production quotas for April. it is expected that Saudi Arabia will stop its voluntary 1.0 million bpd output cut in April. OPEC+ will also likely discuss increasing output by an additional 500,000 bpd. An extra 1.5 million bpd in April could give the market some pause, but the additional supply is likely to be viewed as acceptable to the market and is unlikely to cause any dramatic sell-off. On Friday the FDA’s Vaccines and Related Biological Products Advisory Committee is scheduled to meet. The panel will likely grant Johnson & Johnson an emergency use authorization for it’s single-dose Covid-19 vaccine. Johnson & Johnson has stated that they have around 20 million doses that could be delivered by the end of March. Equities have had a mixed start to the session. The DJIA had hit a record high in yesterday’s session, but has fallen as much as 200 points today. All three major averages are trading well below even.
Crude
- Barclays has raised its oil price forecast by $7 to $62 per barrel for Brent crude. They also raised their WTI forecast by $6 to $58 per barrel. The bank cited the potential for demand to stall if Covid-19 variants begin spreading rapidly throughout parts of the world.
- This morning the U.S. Department of Labor released its weekly jobless claims report and showed that 730,000 first time claims were filed in the week ending February 20. Economists polled by Dow Jones anticipated 845,000 first time claims. Last week first time claims totaled 841,000. Continuing claims hit a pandemic-low of about 4.42 million. Continuing claims are those that have filed for at least two weeks in a row.
- The U.S. House of Representatives is planning to vote on the $1.9 trillion relief bill on Friday. It is expected to pass through the House along party lines. It will then head to the Senate, where a more contentious debate is likely to occur. Senate Majority Leader Chuck Schumer has expressed that the Senate will pass the bill prior to the mid-March deadline, which is when unemployment benefits expire.
- According to the Nigerian National Petroleum Corporation, the country is losing 200,000 barrels of crude oil each day due to vandalism and theft. Nigeria is a member of OPEC, and is the largest crude producer in Africa.
- The April crude oil contract is trading $0.06 higher at $63.28. The 20-day and 100-day moving averages are $58.19 and $48.00, respectively. The 14-day RSI is 78.05%. An RSI above 70% indicates an overbought market from a technical perspective.
- As of 10:22 am CST: April Brent is down $0.15 at $66.89, the U.S. dollar index is 0.330 lower at 89.846, while the nearby e-mini S&P 500 futures contract is down 27 points at 3,895.50.
Diesel
- The March ULSD contract is trading $0.0082 lower at $1.9001. The 20-day and 100-day moving averages are $1.7627 and $1.4463, respectively. The 14-day RSI is 82.84%.
- Yesterday morning the EIA reported that U.S. distillate stocks fell 4.971 million barrels last week. Distillate demand fell 522,000 bpd however.
- The current national average price for retail diesel fuel is $2.889 per gallon. Prices are up about 8 cents from last week at this time. Prices at this time last year averaged $2.872 per gallon, according to AAA.
Gasoline
- The March RBOB contract is trading $0.0076 lower at $1.8880. The 20-day and 100-day moving averages are $1.7143 and $1.3785, respectively. The 14-day RSI is 82.53%.
- Yesterday the EIA reported that U.S. gasoline inventories rose 11,000 barrels for the week ending February 19. Gasoline demand took a massive hit, falling 1.2 million bpd. Much of the contraction in gasoline demand can be attributed to the cold weather that was experienced throughout the country last week.
- According to AAA, the current national average price of retail gasoline is $2.678 per gallon. Retail prices are up about 10 cents from last week at this time. Prices last year at this time averaged $2.472 per gallon.
Propane
- Propane prices are somewhat mixed this morning. At last look, Conway propane was down $0.0500, trading at $1.3000. Mt Belvieu was unchanged, trading at $0.9800.
- Yesterday the EIA reported that U.S. propane inventories fell 5.158 million barrels last week. Propane demand, like gas and diesel demand, took a dramatic hit, falling 918,000 bpd.
- The NOAA’s 6-10 day and 8-14 day forecasts are calling for warmer than average temperatures for much of the country. Home heat demand for propane is likely to continue to contract during this time.
Natural Gas
- The April Natural Gas contract is trading $0.013 lower at $2.782. The 20-day and 100-day moving averages are $2.852 and $2.749, respectively. The 14-day RSI is 48.94%.
- The EIA released its Weekly Natural Gas Storage Report this morning. They showed that working gas in storage fell 338 Bcf in the week ending February 19. Natural gas stocks are 298 Bcf lower than last year at this time, and 161 Bcf below the five-year average.
