Outlook: The energy complex is slightly mixed this morning, as crude and products have traded both sides of even. Some of the negative price action today is likely related to some profit taking, as WTI has risen over $5 per barrel since the lows seen in the first week of March. Yesterday afternoon President Biden signed the $1.9 trillion Covid-19 relief bill into law. Shortly after the signing took place, the White House Press Secretary Jen Psaki stated that the $1,400 direct payments to those that qualify could happen as early as this weekend. The bill included the extension of unemployment benefits until September 6, as well as an expansion of the child tax credit. With more money in circulation, inflation worries have caused the 10-Year Treasury yield to spike to its highest level in more than a year. The benchmark note advanced to 1.635% as of 9:45am CST. Yesterday evening President Biden made his first prime-time address since taking office. He stated that all adults will be eligible for a vaccine by May 1, and that a return to normalcy was possible by July 4. Yesterday marked the one-year anniversary of the World Health Organization declaring that the world was in a pandemic. Equities have had a mixed start to the session, as the DJIA has held onto relatively small gains, while the S&P 500 and the Nasdaq Composite have fallen below even.
Crude
- Analysts at JP Morgan have stated that sustained higher crude prices will spur higher U.S. crude oil output this year. The bank forecasts that at current prices, most onshore production is economical. They also predict that activity would increase in the latter half of 2021, with production increasing in 2022. They have suggested that U.S. crude oil production will average 11.78 million bpd in December 2021, which would be more than a 700,000 bpd increase from the year prior.
- This afternoon Baker Hughes will release its weekly Rig Count Report. They showed that U.S. producers added 1 oil rig last week, bringing the total up to 310.
- This afternoon the CFTC will release its weekly Commitments of Traders Report. We’ll go into the data more on Monday.
- The head of the Robert Koch Institute for Infectious Disease has stated that a third Covid-19 wave in Germany has already begun. Cases in Germany have increased dramatically over the last few weeks. Italy is set to impose another near national lockdown over the Easter weekend in order to attempt to slow the spread of the virus. The measure is expected to be signed into law today.
- The April crude oil contract is trading $0.01 higher at $66.03. The 20-day and 100-day moving averages are $62.44 and $50.41, respectively. The 14-day RSI is 66.89%.
- As of 10:31 am CST: May Brent is down $0.15 at $69.48, the U.S. dollar index is 0.331 higher at 91.752, while the nearby e-mini S&P 500 futures contract is down 14.25 points at 3,922.50.
Diesel
- The April ULSD contract is trading $0.0111 higher at $1.9705. The 20-day and 100-day moving averages are $1.8666 and $1.5206, respectively. The 14-day RSI is 72.37%. An RSI above 70% typically represents an overbought market from a technical perspective.
- Global refinery outages have fallen to 4.53 million bpd as of March 11. That compares with outages totaling 6.15 million bpd a week ago, according to data from Bloomberg.
- According to data from AAA, the current national average retail price for diesel fuel is $3.056 per gallon. Prices last week averaged $2.974 per gallon, while prices last month at this time were $2.740 per gallon.
Gasoline
- The April RBOB contract is trading $0.0190 higher at $2.1570. The 20-day and 100-day moving averages are $1.9739 and $1.5699, respectively. The 14-day RSI is 85.85%.
- Analysts at RBC Capital have stated that the fundamentals for summer gasoline are the most bullish they have been in nearly a decade. Gasoline inventories have fallen dramatically in the last few weeks, as refineries along the Gulf Coast have struggled to bring production back up following the major winter storm that took them offline. With the low inventories and anticipated robust summer gasoline demand, the outlook for gasoline in the near-term looks to be quite strong.
- According to data from AAA, the current national average retail price for gasoline is $2.838 per gallon. Prices have risen about 8.5 cents from last week at this time, and almost 39 cents from a month ago.
Propane
- Propane prices are moving higher this morning. At last look, Conway propane was up $0.0300, trading at $0.8650. Mt Belvieu was up $0.0275, trading at $0.9575.
- The NOAA’s 6-10 day weather outlook is calling for a return to below average temperatures for much of the Midwest. The 8-14 day outlook is predicting mostly average temperatures however. As we approach and move into the spring and summer seasons, propane inventories tend to build due to weaker demand, which in turn can put pressure to the downside for propane prices. Strong exports have helped offset the somewhat weaker demand however.
Natural Gas
- The April Natural Gas contract is trading $0.011 lower at $2.657. The 20-day and 100-day moving averages are $2.811 and $2.735, respectively. The 14-day RSI is 40.83%.
- Yesterday morning the EIA reported that U.S. natural gas inventories fell 52 Bcf in the week ending March 5. Natural gas inventories are 257 Bcf less than last year at this time, and 141 Bcf below the five-year average.
The benchmark 10-year Treasury yield is closely watched as it is an indicator of investor confidence. The 10-year yield has risen dramatically in recent weeks, increasing from about 1% at the end of January to over 1.6% today. Concerns that more money being injected to the economy will cause inflation have pressured the yield higher.
