Outlook: The energy complex has been slightly mixed this morning as crude and products have traded both sides of even. Crude was up more than $1 per barrel earlier in the session. A strengthening dollar is adding some pressure to the complex. Also causing some pause is the OPEC+ meeting scheduled for Thursday of this week. The cartel is scheduled to meet virtually, where they will discuss production quotas for April. It is widely expected that the group will agree to increase production by 500,000 bpd next month. Saudi Arabia is also likely to unwind its 1.0 million bpd voluntary production cut. Traders will be keeping a keen eye on any announcements made from OPEC+. On Friday evening the FDA’s Vaccines and Related Biological Products Advisory Committee voted 22-0 in recommending the Johnson & Johnson coronavirus vaccine for an emergency use authorization. The FDA authorized the vaccine on Saturday. Advisors to the CDC voted on Sunday to recommend the vaccine as well. 3.9 million doses of the single-shot vaccine will be distributed immediately, with Tuesday morning likely being when the first vaccinations will be begin. The Johnson & Johnson vaccine is much easier to transport when compared to the Moderna and Pfizer vaccines, as it does not have to be shipped and stored at as low of temperatures. Johnson & Johnson expects to ship around 20 million doses by the end of the month. On Saturday the U.S. House of Representatives passed the $1.9 trillion coronavirus relief package. The bill will now be sent to the Senate, where a more heated debate is likely to occur as Democrats hold the thinnest of majorities. Senate Majority Leader Chuck Schumer has stated that the bill will be passed before the March 14 deadline when unemployment benefits expire. Equity markets have leaped higher as Treasury yields have retreated from the high’s experienced last week. All three major averages are trading well above even, with the DJIA up over 650 points as of 10:00am.
Crude
- The OPEC+ Joint Technical Committee will meet on Tuesday, while the Joint Ministerial Monitoring Committee will meet on Wednesday this week.
- According to a Reuters survey, OPEC oil output fell 870,000 bpd in February to 24.89 million bpd. This would mark the first monthly decline since June 2020. The large draw in output can be attributed to the voluntary production cut from Saudi Arabia. The country has agreed to cut production by 1.0 million bpd in both February and March. Compliance with output quotas was measured at 121%, according to the same survey.
- Iraqi crude oil exports rose about 100,000 bpd in February, increasing to 2.96 million bpd. Iraq is the second largest member of OPEC, and relies almost entirely on crude exports for its state revenue. Iraq’s average price per barrel of crude in February was $60.33, according to Reuters, increasing revenue by nearly $5 billion when compared to January.
- On Friday afternoon Baker Hughes released its Weekly Rig Count Report. They showed that U.S. producers added 4 oil rigs, bringing the total up to 309. Rigs are still down 369 when compared to last year. Oil rigs fell dramatically through May 2020, and reached a low of 172 on August 14, 2020.
- On Friday afternoon the CFTC released its Weekly Commitments of Traders Report and showed that funds and money managers sold 2,827 crude oil contracts, decreasing net length to 558,799 lots.
- The April crude oil contract is trading $0.35 higher at $61.85. The 20-day and 100-day moving averages are $59.15 and $48.44, respectively. The 14-day RSI is 66.73%.
- As of 10:25 am CST: May Brent is up $0.53 at $64.95, the U.S. dollar index is 0.071 higher at 90.950, while the nearby e-mini S&P 500 futures contract is up 85.25 points at 3,894.50.
Diesel
- The April ULSD contract is trading $0.0023 higher at $1.8454. The 20-day and 100-day moving averages are $1.7792 and $1.4604, respectively. The 14-day RSI is 69.23%.
- On Friday the CFTC released its Weekly Commitments of Traders Report and showed that funds and money managers sold 10,569 heating oil contracts, reducing net length to 4,164 lots.
Gasoline
- The April RBOB contract is trading $0.0148 higher at $1.9653. The 20-day and 100-day moving averages are $1.8435 and $1.5042, respectively. The 14-day RSI is 81.06%. An RSI above 70% represents an overbought market from a technical perspective.
- On Friday the CFTC released its Weekly Commitments of Traders Report and showed that funds and money managers sold 14,110 RBOB contracts, reducing net length to 47,211 lots.
- According to analysts at Wedbush, electric vehicle stocks could climb up to 50% in 2021. The investment firm expects the electric vehicle industry to grow into a $5 trillion market over the next decade. Fortune Business Insights valued the market at around $250 billion in 2020.
Propane
- Propane prices are mixed this morning. At last look, Conway propane was down $0.0600, trading at $0.9700. Mt Belvieu was up $0.0275, trading at $0.9750.
- The NOAA’s 6-10 day and 8-14 day weather forecasts are calling for high probability of warmer than average temperatures throughout much of the country. With warm weather on the horizon, home heating demand for propane is likely to continue to contract, and prices are likely to fall.
Natural Gas
- The April Natural Gas contract is trading $0.007 higher at $2.778. The 20-day and 100-day moving averages are $2.865 and $2.748, respectively. The 14-day RSI is 47.33%.
- On Friday the CFTC released its Weekly Commitments of Traders Report and showed that funds and money managers sold 10,038 natural gas contracts, reducing net length to 27,959 lots.
- Reuters estimates that U.S. natural gas production in the lower 48 states fell to 86.5 bcfd in February, which is the lowest since October 2018. Production in January was at 91.1 bcfd.
U.S. providers are administering about 1.74 million Covid-19 vaccines each day on average. President Biden has pledged that the U.S. would administer 100 million doses by his 100th day in office. At the current pace, that goal would be achieved. With the Johnson & Johnson vaccine added to the mix, and the company stating around 20 million doses would be distributed by the end of March, it is likely the number of vaccines administered each day will continue to rise. Both Pfizer and Moderna also have plans to increase production in March and April, which would nearly double what they are currently producing.
