Morning Highlights
Morning Highlights

4.1.21 The energy complex has pushed higher this morning as market participants await a decision from OPEC+

Ryan Kaup

Apr 1, 2021

Outlook: The energy complex has pushed higher this morning as market participants await a decision from OPEC+. Members of OPEC+ are meeting virtually today, where it is widely expected that the group will hold production steady in May. Saudi Arabia is also likely to continue its voluntary 1.0 million bpd output cut. However, U.S. Energy Secretary Jennifer Granholm stated on Twitter that she had spoken to the Saudi Energy Minister Prince Abdulaziz Bin Salman. She stated that the conversation focused on the importance of international cooperation to ensure affordable energy for consumers. This conversation may give some credence to the idea of easing output cuts from OPEC+. All eyes will be on any developments from the group. Yesterday President Biden unveiled a $2.2 trillion infrastructure plan in Pittsburgh. The plan calls for $621 billion in funding for roads, bridges, and public transport. The bill also includes funding for drinking-water infrastructure, as well as $580 billion invested into American manufacturing. A focus on the transition from traditional to green energy is also included in the bill. This is part 1 of 2, according to President Biden. The first part focuses on U.S. infrastructure, while the second part of the package will be aimed at improving education and expanding paid leave and health-care coverage. The bold plan is likely to have a contentious battle to become law, as corporate tax hikes are required to fund the bill. Democrats have given a July 4 deadline to get the legislation passed. Equities have shrugged off the possibility of higher taxes, as the S&P 500 pushed over 4,000 for the first time ever earlier in the session. All three major averages are trading above even.

 

Crude

 

  • According to the U.S. Department of Labor, first-time claims for unemployment benefits totaled 719,000 last week. Economists polled by Dow Jones anticipated 675,000 first-time claims. Continuing claims fell 46,000 to just under 3.8 million.
  • Pfizer and BioNTech said today that their Covid-19 vaccine is around 91% effective at preventing the disease. The change from about 95% efficacy to 91% reflects updated trial data. The vaccine was 100% effective among trial participants in South Africa as well.
  • According to the EIA, U.S. crude production fell to 11.08 million bpd in January, which was slightly lower than December 2020 output of 11.101 million bpd. Crude production is down about 13% in a year-on-year comparison.
  • Employees at Google will begin returning to offices in a limited capacity in April, according to a report from CNBC. Google was one of the first major companies to send employees home last year due to the coronavirus. Employees can return to offices on a volunteer basis this month, with a hard deadline set for September 1.
  • The May crude oil contract is trading $0.89 higher at $60.05. The 20-day and 100-day moving averages are $62.68 and $53.13, respectively. The 14-day RSI is 48.50%.
  • As of 10:07 am CST: June Brent is up $0.16 at $62.90, the U.S. dollar index is 0.250 lower at 92.982, while the nearby e-mini S&P 500 futures contract is up 27.00 points at 3,994.50.

 

Diesel

 

  • The May ULSD contract is trading $0.0329 higher at $1.8027. The 20-day and 100-day moving averages are $1.8559 and $1.6102, respectively. The 14-day RSI is 46.61%.
  • The massive infrastructure bill that was announced yesterday would be heavily intensive for diesel fuel if it were to become law. Seasonally low inventories and expected strong demand this spring and fall due to heavy field activity could lead to higher basis values, especially if the infrastructure bill were to pass.

 

Gasoline

 

  • The May RBOB contract is trading $0.0310 higher at $1.9907. The 20-day and 100-day moving averages are $2.0141 and $1.6797, respectively. The 14-day RSI is 51.28%.
  • The White House has asked the U.S. Environmental Protection Agency to study whether using renewable fuels to power electric vehicle charging stations should generate RINs, which are tradeable credits.
  • Yesterday the EIA reported U.S. gasoline demand rose 275,000 bpd to 8.891 million bpd. Gasoline demand has now positioned itself within the seasonal five-year average for the first time this year.

 

Propane

 

  • Propane prices are mixed this morning. At last look, Conway propane was down $0.0175, trading at $0.8300. Mt. Belvieu was up $0.0475, trading at $0.9575.
  • Yesterday morning the EIA reported that U.S. propane inventories fell 2.022 million barrels last week. Propane demand rose 491,000 bpd to 1.676 million bpd, while exports fell 187,000 bpd to 1.130 million bpd. Typically inventories begin to build in the spring, while demand starts to fall. Perhaps we’re a week or two away from starting to see that seasonal trend beginning to take place.

 

Natural Gas

 

  • The May Natural Gas contract is trading $0.035 higher at $2.643. The 20-day and 100-day moving averages are $2.621 and $2.699, respectively. The 14-day RSI is 44.71%.
  • This morning the EIA released its Weekly Natural Gas Storage Report. They showed that working gas in storage rose 14 Bcf in the week ending March 26. Natural gas inventories are 225 Bcf less than last year at this time and 36 Bcf below the five-year average.

 

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