Outlook: The energy complex has pushed into negative territory this morning, as crude and products are all trading well below even. Another crude oil build is expected to be reported this week by the EIA. Rising crude inventories are adding pressure to the complex. The Reuters poll of analysts and traders is anticipating that the EIA will report a 2.715 million barrel build in U.S. crude oil stocks for the week ending March 12. Crude inventories have risen over 35 million barrels in the last two weeks due to the weather event in Texas that caused refineries to shutdown. A strengthening dollar is also adding an additional layer of downside pressure this morning. The AstraZeneca vaccine is being suspended throughout much of Europe, which is likely to cause additional delays in regard to vaccine rollouts throughout the continent. Analysts at Moody’s Analytics have stated that Asia’s economic recovery could slow down as more countries are suspending the vaccine. Moderna has started studying the effects of its Covid-19 vaccine in children from 6 months to 11 years old. Moderna plans to enroll around 6,750 children in the U.S. and Canada in the trial. Moderna began testing the two-dose vaccine on adolescents between the ages of 12 and 18 in December 2020. Equities have had a mixed session this morning, as the S&P 500 and the Nasdaq Composite are trading in positive territory, while the DJIA has fallen below even. Inflation concerns and rising interest rates will continue to play an incremental part in investor sentiment going forward. The Federal Reserve is holding a two-day meeting starting today, with Fed chairman Jerome Powell expected to speak tomorrow. The Fed is expected to release new economic and interest rate forecasts.
Crude
- According to a report from the EIA, U.S. oil output from seven major shale formulations is likely to decline by around 46,000 bpd in April. Output from the Permian basin is expected to rise however, with production increasing by about 11,000 bpd next month. That would bring output from the Permian to 4.3 million bpd.
- China added about 1 million bpd to its crude oil inventories in January and February, according to data from Reuters. Refinery throughput in January and February averaged around 14.13 million bpd.
- The U.S. solar industry had a record year in 2020. Despite the pandemic and the economic fallout it caused, the industry added a record 19.2 gigawatts of new capacity last year, which was a 43% increase from 2019, according to a report from the Solar Energy Industries Association and Wood Mackenzie. One gigawatt is enough to power around 190,000 homes. The U.S. currently has about 97.2 GW of solar capacity, which is enough to power about 18 million homes. Solar installations are expected to quadruple by 2030.
- On Friday the CFTC released its weekly Commitments of Traders report and showed that funds and money managers purchased 27,146 crude oil contracts, increasing net length to 586,146 lots.
- The April crude oil contract is trading $1.15 lower at $64.24. The 20-day and 100-day moving averages are $62.94 and $50.85, respectively. The 14-day RSI is 59.59%.
- As of 10:19 am CST: May Brent is down $0.95 at $67.93, the U.S. dollar index is 0.082 higher at 91.915, while the nearby e-mini S&P 500 futures contract is up 6 points at 3,973.50.
Diesel
- The April ULSD contract is trading $0.0248 lower at $1.9241. The 20-day and 100-day moving averages are $1.8821 and $1.5350, respectively. The 14-day RSI is 62.80%.
- On Friday the CFTC reported that funds and money managers purchased 815 heating oil contracts, increasing net length to 5,010 lots.
- According to TSA checkpoint data, 1.263 million travelers went through U.S. airport security yesterday. That compares with 1.519 million in 2020, and 2.545 million in 2019. Passenger counts have risen over 1.0 million in 7 of the last 10 days. Airline passengers fell as low as 87,534 in April of 2020.
Gasoline
- The April RBOB contract is trading $0.0104 lower at $2.0942. The 20-day and 100-day moving averages are $2.002 and $1.5860, respectively. The 14-day RSI is 71.70%. An RSI above 70% typically represents an overbought market from a technical perspective.
- On Friday the CFTC reported that funds and money managers purchased 4,360 RBOB contracts, increasing net length to 46,697 lots.
- According to Patrick DeHaan, head of petroleum analysis at GasBuddy, retail gasoline sales last week rose 1% above where there were last year at this time. Lockdowns across much of the country started in mid-March, so we’re approaching the point where gasoline sales plummeted.
Propane
- Propane prices are moving lower this morning. At last look, Conway propane was down $0.0050, trading at $0.8500. Mt Belvieu was down $0.0075, trading at $0.9350.
- In both the 6-10 day and 8-14 day forecast from the NOAA, warmer than average temperatures are expected throughout much of the country. Temperatures here in the Twin Cities are expected to be in the mid-50’s through the end of March. Propane demand is likely to contract, causing inventories to begin to rise, which is typical for this time of year.
Natural Gas
- The April Natural Gas contract is trading $0.055 higher at $2.539. The 20-day and 100-day moving averages are $2.765 and $2.725, respectively. The 14-day RSI is 35.22%.
- On Friday the CFTC reported that funds and money managers sold 18,341 natural gas contracts. Funds are now net short 841 lots.
- In its monthly forecast, the EIA estimates that natural gas production from the major shale basins is expected to fall by about 0.3 bcfd to 82.6 bcfd in April. The monthly record high was achieved in December 2019, with 86.9 bcfd in output.
The AstraZeneca vaccine is being suspended in many countries in Europe, with Sweden and Latvia being the latest to halt use due to concerns over blood clots. Vaccine rollouts in Europe have been slow, with many countries being placed back under lockdown to help halt the spread of the virus. Fuel demand in parts of Europe are likely to continue to be weak due to lockdowns and rising Covid-19 cases.
