Outlook: The energy complex has faced a bit of a correction this morning, as crude and products are all trading well below even. A much stronger dollar is pressuring the market lower. Strength in the dollar was prompted by a sell-off in the bond market. Adding further pressure to the market is the expectation that OPEC+ will agree to increase production in April. The group is meeting virtually on March 4, where it is increasingly likely that they will agree to raise production by 500,000 bpd in April. Saudi Arabia is also likely to halt the 1.0 million bpd voluntary output cut in April, which they agreed to undertake in February and March. The U.S. House of Representatives is aiming to pass the $1.9 trillion stimulus bill later today and send it to the Senate. Negotiations in the Senate are likely to change the language of the bill and what it includes. Yesterday the Senate parliamentarian Elizabeth Macdonough ruled that the $15 minimum wage portion of the stimulus bill cannot be included as it does not comply with the rules with regard to passing a bill via budget reconciliation. Senate majority leader Chuck Schumer has stated that Democrats plan to pass the bill and send it to President Biden before the March 14 expiration of unemployment benefits. The relief bill includes $1,400 direct payments, up to $3,600 to families with children 6 years old and younger, $400 per week unemployment insurance, a combined $70 billion for the Covid-19 vaccination program and for testing, and $350 billion for state and local governments. Equities have had a mixed session thus far. The DJIA has fallen into negative territory while the S&P 500 and the Nasdaq Composite have traded both sides of even.
Crude
- According to analysts at JPMorgan, nearly 4 million bpd of refining capacity is still shut down in the U.S., and it could take until the end of next week for that capacity to resume operations.
- The personal consumption expenditures price index, which is the Federal Reserve’s preferred inflation gauge, rose 0.3% in January. Economists surveyed by Dow Jones anticipated a 0.2% increase. The index was up 1.5% in a year over year comparison, which matched the estimate from Dow Jones.
- Today at noon CST Baker Hughes will release its Weekly Rig Count Report. Last week they showed that U.S. producers cut 1 oil rig, bringing the total down to 305.
- This afternoon the CFTC will release its Commitments of Traders Report. We’ll discuss the data on Monday.
- The April crude oil contract is trading $1.15 lower at $62.38. The 20-day and 100-day moving averages are $58.70 and $48.24, respectively. The 14-day RSI is 70.33%. An RSI above 70% indicates an overbought market from a technical perspective.
- As of 10:14 am CST: April Brent is down $0.70 at $66.18, the U.S. dollar index is 0.425 higher at 90.559, while the nearby e-mini S&P 500 futures contract is up 9 points at 3,837.00.
Diesel
- The March ULSD contract is trading $0.0341 lower at $1.8725. The 20-day and 100-day moving averages are $1.7726 and $1.4537, respectively. The 14-day RSI is 74.19%. The March contract expires today.
- Chinese crude oil imports are expected to slow down in Q2, according to a report from Reuters. Following the Lunar New Year, China is in a period of lower domestic demand for refined products. The rising price of crude has also dampened appetite for imports.
- The International Maritime Organization is set to adopt energy efficiency regulations in June that are poised to reduce emissions from new and existing ships by 40% by 2030. By 2050 the IMO aims to reduce emissions from ships by 50%, according to Reuters.
Gasoline
- The March RBOB contract is trading $0.0001 lower at $1.8922. The 20-day and 100-day moving averages are $1.7297 and $1.3860, respectively. The 14-day RSI is 79.65%.
- Rosneft, Russia’s largest oil company, is spending about 5% of its investment budget each year to achieve climate goals. Spending on climate initiatives could reach over $650 million this year, according to data from Reuters. British Petroleum owns just under 20% of Rosneft. BP has announced one of the most ambitious climate agendas from any oil major thus far.
Propane
- Propane prices are moving lower this morning. At last look, Conway propane was down $0.1300, trading at $1.1200. Mt Belvieu was down $0.0050, trading at $0.9600.
- We’re experiencing some pretty rapid swings in the nearby Conway propane contract. Prices have fallen dramatically following the runup that was experienced last week due to the weather situation in Texas and along the Gulf Coast. Home heat demand for propane is likely to continue to contract as temperatures throughout much of the country have risen to above average levels, which is likely to continue pressuring front month Conway values.
Natural Gas
- The April Natural Gas contract is trading $0.047 lower at $2.730. The 20-day and 100-day moving averages are $2.855 and $2.748, respectively. The 14-day RSI is 45.18%.
- Yesterday morning the EIA reported that U.S. Natural Gas Inventories fell 338 Bcf in the week ending February 19, which was a slightly smaller draw than expected. Natural gas inventories have fallen 161 Bcf below the five-year average.
- Natural gas futures values have continued to slide and have fallen to a four-week low. Forecasts for mild weather have pressured nearby values as demand is expected to contract as we move into the Spring.
Chinese crude oil imports are expected to slowdown in Q2. The rapid rise in crude oil values has dampened appetite for imports. Demand for refined products also typically slows down following the Lunar New Year holiday.
