Morning Highlights
Morning Highlights

3.30.21 Energy markets have shifted slightly lower this morning as weak demand in Europe and the re-opening of the Suez Canal weigh on the complex

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Mar 30, 2021

Outlook: Energy markets have shifted slightly lower this morning as weak demand in Europe and the re-opening of the Suez Canal weigh on the complex. Germany, which is the largest oil consumer in Europe, has extended its lockdown until April 18. Lockdowns in France, Austria, Norway, and Switzerland have also been announced. According to a report from Rystad Energy, the renewed lockdowns and poor vaccine rollouts in the region could prevent the recovery of up to 1 million bpd of oil demand this year. Yesterday the Ever Given, the large container ship that was blocking the Suez Canal, was refloated, which has allowed ship traffic to resume. The waterway is used by oil producers in Asia to ship crude to refineries in the U.S. and Europe. Preventing a steeper sell-off is the expectation that OPEC+ will decide to hold production steady in May. The group meets this week, where it is widely anticipated that Saudi Arabia will continue its voluntary 1.0 million bpd output cut, while production from the broader group will remain relatively flat. Earlier this morning it was reported that the Saudi’s are preparing to extend their output cut into June. Equities are having another tough session as the 10-year Treasury yield hit a 14 month high earlier in the session. The benchmark 10-year Treasury yield has been pressured higher, as tomorrow it is expected that President Biden will announce a massive infrastructure bill.

 

Crude

 

  • Chinese imports of Iranian crude have hit a record high this month. Imports are likely to reach close to 1 million bpd in March. Estimates from Reuters are calling for imports from Iran to be around 27 million barrels this month.
  • According to a Reuters report, OPEC+ excess cumulative production rose to nearly 3 million bpd in February.
  • Mutations of the coronavirus could reportedly render current vaccines ineffective within a year, according to a poll of epidemiologists and infectious disease experts. The survey was conducted by the People’s Vaccine Alliance. The survey of 77 experts found that about 30% believe current vaccines will be ineffective in under a year.
  • The EIA will release its Weekly Petroleum Status Report tomorrow at 9:30am CST. This afternoon an industry group will release its weekly inventory report.
  • The May crude oil contract is trading $1.00 lower at $60.56. The 20-day and 100-day moving averages are $62.71 and $52.93, respectively. The 14-day RSI is 48.72%.
  • As of 10:26 am CST: June Brent is down $0.32 at $64.60, the U.S. dollar index is 0.277 higher at 93.221, while the nearby e-mini S&P 500 futures contract is down 8.75 points at 3,950.25.

 

Diesel

 

  • The April ULSD contract is trading $0.0124 lower at $1.7974. The 20-day and 100-day moving averages are $1.8648 and $1.5990, respectively. The 14-day RSI is 46.94%.
  • According to TSA checkpoint data, 1.46 million passengers went through airport security yesterday. The same day in 2020 saw 154,080 passengers. Despite the dramatic turnaround in demand, air traffic throughput is still down about 40% when compared to pre-pandemic levels.

 

Gasoline

 

  • The April RBOB contract is trading $0.0117 lower at $1.9835. The 20-day and 100-day moving averages are $2.0171 and $1.6601, respectively. The 14-day RSI is 53.48%.
  • U.S. gasoline sales for 2021 have exceeded prior-year levels for the first time since March 2020, according to an OPIS report. Last March strict coronavirus restrictions caused gasoline demand to crater. Despite the increase over last year, same-store sales are down 16% when compared to pre-pandemic levels.
  • Lexus is planning to introduce 20 new or redesigned vehicles by 2025. At least half of them will be all-electric or electrified hybrid models. They also plan to offer electric versions of all of its vehicle models by 2025.

 

Propane

 

  • Propane prices are moving higher this morning. At last look, Conway propane was up $0.0100, trading at $0.8550. Mt. Belvieu was up $0.0125, trading at $0.9125.
  • The NOAA’s 6-10 day weather forecast is calling for dramatically warmer weather throughout much of the country. The 8-14 day outlook looks quite similar. Temperatures here in the Twin Cities reach into the high 70’s this coming weekend. With warmer weather on the horizon, it is likely we’ll begin to see propane inventories start to build, which typically starts to happen around this time of the year. With the potential for rising inventories and weakening demand, nearby hub values might experience weakness.

 

Natural Gas

 

  • The May Natural Gas contract is trading $0.035 lower at $2.618. The 20-day and 100-day moving averages are $2.642 and $2.704, respectively. The 14-day RSI is 46.01%.
  • Natural gas futures have slipped this morning as mild weather is likely to reduce home heating demand. Despite the weak demand outlook, natural gas exports are on track to hit an all-time high in March. The amount of gas flowing to natural gas export plants has averaged 10.8 bcfd so far this month, which is slightly above the 10.7 bcfd record seen in December.

 

The 10-year Treasury yield hit as high as 1.776% earlier in the session, which is a 14-month high. A massive infrastructure bill that is expected to be announced on Wednesday has boosted expectations of a broad economic recovery. Along with that economic recovery are the expectations that inflation will rise. The legislation is likely to have a price tag of at least $3 trillion.

 

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