Outlook: The energy complex has pushed slightly higher this morning as crude and products trade just above even. The market has been moderately steady as we await a decision from OPEC+. The Joint Technical Committee is meeting today, and the Joint Ministerial Monitoring Committee will meet tomorrow. The JTC reviews the fundamental aspect of the market, as well as measuring compliance among members of the group. The OPEC+ oil ministers will meet on Thursday where it is widely expected that the group will increase production by 500,000 bpd in April. Saudi Arabia will also likely unwind its 1.0 million bpd voluntary production cut in April as well. OPEC’s Secretary General Mohammad Barkindo said that the group sees the market outlook as positive, but downside risks due to the pandemic still exist. Barkindo also stated that the group sees oil demand growth this year at 5.8 million bpd to about 96 million bpd total. Prior to the pandemic, global oil demand was at about 100 million bpd. Positive vaccine data from the U.K. has given the energy complex a bit of a lift this morning, as researchers in the country have determined that the Pfizer and AstraZeneca vaccines are effective even after just one dose. Data from a study that started in January has showed that protection against symptomatic Covid-19 four weeks after the first dose ranged between 57% - 61% for the Pfizer vaccine, and 60% - 73% for the AstraZeneca shot. Equities have had a somewhat back and forth session thus far, giving back some of the gains seen yesterday. The S&P 500 had its best day since June yesterday, but all three major averages are currently trading below even.
Crude
- This afternoon an industry group will release its weekly inventory report. Tomorrow the EIA will release its Weekly Petroleum Status Report. The Reuters poll of analysts and traders is predicting that the EIA will report a 1.850 million barrel draw in U.S. crude oil stocks for the week ending February 26.
- President Biden is set to announce today that Merck, a large pharmaceutical company, will help produce Johnson & Johnson’s single shot Covid-19 vaccine. The announcement comes as Johnson & Johnson had fallen behind in vaccine production, according to a report from NBC News. Merck had originally planned to produce its own vaccine, but those plans were stopped in January after clinical data showed its shots were ineffective. 3.9 million doses of the J&J vaccine will be delivered throughout the country this week, and 20 million doses are scheduled to be delivered by the end of March.
- The International Energy Agency has stated that global CO2 emissions are rising once again, after contracting nearly 6% in 2020. Emissions from major economies were up 2% in December 2020 compared to 2019 levels, indicating that economic activity has increased and demand for energy has risen.
- The April crude oil contract is trading $0.12 higher at $60.76. The 20-day and 100-day moving averages are $59.45 and $48.61, respectively. The 14-day RSI is 60.84%.
- As of 10:23 am CST: May Brent is up $0.12 at $63.81, the U.S. dollar index is 0.165 lower at 90.874, while the nearby e-mini S&P 500 futures contract is down 21.00 points at 3,877.75.
Diesel
- The April ULSD contract is trading $0.0125 higher at $1.8317. The 20-day and 100-day moving averages are $1.7875 and $1.4660, respectively. The 14-day RSI is 64.74%.
- The Reuters poll of analysts and traders is estimating that the EIA will report a 2.90 million barrel draw in U.S. distillate stocks for the week ending February 26. Distillate inventories fell 4.971 million barrels in the week ending February 19.
- India’s refined fuel consumption could rise by nearly 10% by March 2022, according to government projections. The projected increase would be the highest pace of growth in six years. Sales of diesel and gasoline are estimated to rise by 13.3% each by the end of Q1 in 2022.
Gasoline
- The April RBOB contract is trading $0.0115 higher at $1.9544. The 20-day and 100-day moving averages are $1.8553 and $1.5101, respectively. The 14-day RSI is 77.99%. An RSI above 70% represents an overbought market from a technical perspective.
- The Reuters poll of analysts and traders is predicting that the EIA will report a 2.125 million barrel draw in U.S. gasoline stocks for the week ending February 26. Gasoline inventories rose 11,000 barrels in the week ending February 19.
- At the end of February, the amount of refined products held on tankers for more than 10 days was 19.2 million barrels, down from 84 million barrels in May of 2020, according to data from IHS Markit. Prices for floating storage surged above $100,000 per day in May, but have currently fallen to less than $10,000 per day.
- Volvo has stated that they will be fully electric by 2030. The company will look to remove cars with traditional combustion engines, including hybrids, by the end of this decade. Volvo is aiming for half of its global sales to be fully electric by 2025. The company’s Chief Technology Officer Henrik Green has said that “there is no future for cars with an internal combustion engine.”
Propane
- Propane prices have found some strength this morning. At last look, Conway propane was up $0.0150, trading at $0.9350. Mt Belvieu was up $0.0150 as well, trading at $0.9775.
- The NOAA’s 6-10 day and 8-14 day forecasts are calling for a high probability of warmer than average temperatures for much of the country. Temperatures here in the Twin Cities reach well above 50 degrees by early next week. The unseasonably warm weather will pressure home heat demand and likely lead to hub prices falling.
Natural Gas
- The April Natural Gas contract is trading $0.061 higher at $2.838. The 20-day and 100-day moving averages are $2.867 and $2.749, respectively. The 14-day RSI is 52.89%.
- Natural gas futures have moved higher this morning. Production of natural gas has averaged 90.4 billion bcfd so far in March, according to Reuters. That is above the 28 month low of 86.5 bcfd in February. Exports look to be rebounding from the four month low seen in February as well, with March averaging 9.7 bcfd compared to 8.5 bcfd last month.
As mentioned above, India’s Petroleum Planning and Analysis Cell is predicting a nearly 10% rise in fuel consumption by March of 2022. India’s economy returned to growth in the fourth quarter of 2020. Diesel fuel consumption accounts for around 45% of the refined fuel demand in the country and is viewed as the fuel of industry and economic growth. With India’s economy expanding, demand for refined fuels should see significant growth.
