Morning Highlights
Morning Highlights

3.29.21 The energy complex has been mixed and choppy this morning as crude and products have traded both sides of even

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Mar 29, 2021

Outlook: The energy complex has been mixed and choppy this morning as crude and products have traded both sides of even. Pressuring the complex is the news that the Ever Given, the large shipping container that had been blocking traffic in the Suez Canal, has been refloated. Traffic in the waterway has resumed as the vessel has been repositioned into the middle of the canal. The blockage had been providing a layer of support to the complex, as the waterway is used to ship crude from OPEC producers to the U.S. and Europe. Later this week OPEC+ will hold meetings to discuss compliance as well as market fundamentals. Due to the recent volatility and the continued lockdowns in Europe, the group is expected to hold production relatively steady. According to a Reuters report, Russia would support keeping output stable in May. Russia is likely to push for a small increase in its quota to meet rising seasonal demand, however. Saudi Arabia is likely to continue its voluntary 1.0 million bpd output cut for an additional month as well. Market participants will be keeping a keen eye on any developments from the group. Equities are having a rocky start to today’s session, as all three major averages are trading well below even.

 

Crude

 

  • Nearly 450 vessels were either stuck waiting or were headed to the Suez Canal prior to the blockage. About 12% of global trade by volume goes through the canal. Around 30% of the world’s daily shipping container volume passes through the waterway as well, according to a report from U.S. News.
  • According to a CDC study of health care workers, one dose of either the Moderna or Pfizer vaccine was 80% effective in preventing covid-19 infections. The effectiveness of the partial immunization was observed two weeks after the first dose. Effectiveness increased to 90% two weeks after the second dose, according to the study.
  • On Friday Baker Hughes released its weekly Rig Count Report. They showed that U.S. producers added 6 oil rigs last week, bringing the total up to 324. Oil rigs have steadily risen since September, but production has remained relatively flat, indicating most of the added rigs are being used to maintain crude production. The oil rig count is down 300 from last year at this time.
  • On Friday the CFTC released its weekly Commitments of Traders Report. They showed that funds and money managers sold 8,809 crude oil contracts in the week ending March 23. Funds are net long 565,885 lots.
  • The May crude oil contract is trading $0.57 lower at $60.40. The 20-day and 100-day moving averages are $62.62 and $52.71, respectively. The 14-day RSI is 49.05%.
  • As of 10:15 am CST: June Brent is down $0.51 at $63.92, the U.S. dollar index is 0.193 higher at 92.959, while the nearby e-mini S&P 500 futures contract is down 31.00 points at 3,933.75.

 

Diesel

 

  • The April ULSD contract is trading $0.0236 lower at $1.7864. The 20-day and 100-day moving averages are $1.8643 and $1.5925, respectively. The 14-day RSI is 46.28%.
  • On Friday the CFTC released its weekly Commitments of Traders Report and showed that funds and money managers sold 67 heating oil contracts, reducing net length to 7,844 lots.
  • According to TSA checkpoint data, 1.574 million passengers went through U.S. airport security on Sunday. Last year at this time U.S air travel was almost non-existent, as just 180,002 passengers were reported. Over 2.5 million passengers traveled on March 28, 2019, indicating that demand is still down about 38% when compared to pre-pandemic levels.

 

Gasoline

 

  • The April RBOB contract is trading $0.0085 lower at $1.9588. The 20-day and 100-day moving averages are $2.0123 and $1.6519, respectively. The 14-day RSI is 49.95%.
  • On Friday the CFTC released its weekly Commitments of Traders Report and showed that funds and money managers sold 620 RBOB contracts in the week ending March 23. Funds are net long 47,076 lots.
  • Shell restarted its gasoline and diesel producing units yesterday at its Deer Park, Texas refinery. The refinery is capable of producing 318,000 bpd. Most of the refinery has been shutdown since February 15, which was when bitterly cold temperatures crippled much of the refining capacity in Texas.

 

Propane

 

  • Propane prices are moving higher this morning. At last look, Conway propane was up $0.0025, trading at $0.8300. Mt. Belvieu was up $0.0025, trading at $0.9000.
  • According to the most recent data from the NOAA, temperatures throughout the country are expected to be much warmer than average for much of the next two weeks. Temperatures this coming weekend here in the Twin Cities are above 70 degrees. With winter heat demand for propane all but wrapped up, inventories are likely to start increasing, which may start to put pressure on nearby hub prices.

 

Natural Gas

 

  • The April Natural Gas contract is trading $0.025 lower at $2.532. The 20-day and 100-day moving averages are $2.612 and $2.686, respectively. The 14-day RSI is 41.37%.
  • On Friday the CFTC released its weekly Commitments of Traders Report and showed that funds and money managers purchased 1,106 natural gas contracts in the week ending March 23. Funds are net short 38,163 lots.

 

Roughly 28% of the U.S. population has received at least one dose of a Covid-19 vaccine, and about 15.5% have been fully vaccinated, according to the most recent data from the CDC. According to a report from CNBC, when Israel hit around 25% of its population being vaccinated, case counts started to decline. Cases here in the U.S., based on the seven-day moving average, have increased 16% when compared to the week prior. Despite the recent rise, cases are down over 70% when compared to early January.

 

Energy markets will be closed on Friday, April 2 due to the Good Friday holiday. CHS Energy Hedging will not be staffed on Friday.