Outlook: Energy futures have fallen this morning as mounting Covid-19 cases in India weigh on the complex. Yesterday Brent crude nearly hit $70 per barrel on the July contract, but this morning prices have taken a bit of a breather as the market reassess the demand outlook. Rising Covid-19 cases in India had been put on the back burner the last few trading sessions, as traders and analysts had hoped that the country’s second wave would fizzle out. Hopes of that happening have been dashed however, as India reported another daily record for the number of confirmed cases and deaths caused by the virus. India reported 412,000 new cases, and nearly 4,000 deaths in the last 24 hours, setting new all-time highs. Health experts have stated that case counts could be as much as 10 times higher than what is being reported due to the shortage of testing kits. The official case count is likely to hit 500,000 in the coming weeks, according to a report from the Washington Post. The easing of lockdowns and falling case counts in the U.S. and parts of Europe are providing a layer of support to the complex however. Earlier this week the seven-day average number of cases in the U.S. fell below 50,000 for the first time since October and is now at about 47,000 new cases per day. If the current pace of vaccinations is upheld in the U.S., about 70% of the population will have received at least one dose of a Covid-19 vaccine by mid-June. Case counts would likely continue to contract during that time as well. Despite a better than expected weekly jobless claims report, equities have had a mixed session thus far. The Nasdaq Composite and the S&P 500 are trading well below even, while the DJIA has traded both sides.
- This morning the U.S. Department of Labor reported that first-time claims for unemployment insurance hit a pandemic low in the week ending May 1. New claims totaled 498,000, which was the first time claims have been below 500,000 since March 2020. Economists polled by Dow Jones anticipated 527,000 new claims. Continuing claims rose slightly, up 37,000 when compared to the week prior.
- Moderna announced this morning that early data from clinical trials suggest that its vaccine is 96% effective in children ages 12 to 17. Yesterday the company announced that a booster shot has generated a promising immune response against the South African and Brazilian variants of the virus as well. Moderna is preparing to submit data to the FDA for full approval, which would allow them to market the vaccine directly to consumers.
- Yesterday morning the EIA reported that U.S. crude oil stocks fell 7.991 million barrels last week. Strong exports and a continued rise in refinery utilization helped drive stocks lower. Crude exports rose dramatically, increasing by nearly 1.6 million bpd, while imports fell nearly an equal amount, dropping 1.16 million bpd.
- The June crude oil contract is trading $0.53 lower at $65.10. The 20-day and 100-day moving averages are $62.93 and $57.51, respectively. The 14-day RSI is 59.97%.
- As of 10:12 am CST: July Brent is down $0.52 at $68.44, the U.S. dollar index is 0.350 lower at 90.958, while the nearby e-mini S&P 500 futures contract is down 8.00 at 4,152.00.
- The June ULSD contract is trading $0.0057 lower at $1.9968. The 20-day and 100-day moving averages are $1.9029 and $1.7401, respectively. The 14-day RSI is 66.02%.
- Yesterday the EIA reported that U.S. distillate inventories fell 2.898 million barrels in the week ending April 30. The EIA also reported that U.S. demand fell 205,000 bpd to 4.125 million bpd.
- A topic we’ve discussed previously and will likely continue to mention is that Midwest distillate inventories are well below the five-year seasonal average. Basis values remain on the top side of the five-year average and will likely continue to remain elevated throughout what is expected to be a robust planting and harvest season.
- The June RBOB contract is trading $0.0245 lower at $2.1268. The 20-day and 100-day moving averages are $2.0450 and $1.8336, respectively. The 14-day RSI is 63.70%.
- Yesterday morning the EIA reported that U.S. gasoline inventories rose 737,000 barrels last week. The increase in gasoline inventories can be attributed to strong imports, as the U.S. imported over 1.0 million bpd of gasoline for the third consecutive week.
- U.S. gasoline demand fell 13,000 bpd to 8.864 million bpd last week, according to the most recent EIA data. Demand is within the five-year historical average, but is still down about 1.0 million bpd, or around 10% when compared to the same time period in 2019.
- Propane prices are slightly mixed this morning. At last look, Conway propane was flat, trading at $0.7900. Mt. Belvieu was down $0.0050, trading at $0.8175.
- Yesterday morning the EIA reported that U.S. propane stocks rose 470,000 barrels last week. Propane demand rose while exports fell a corresponding amount. The export/demand dynamic will be important to follow along with going forward. If we don’t experience larger builds in propane stocks due to high exports, supply in the fall and winter could become an issue.
- The June Natural Gas contract is trading $0.009 lower at $2.929. The 20-day and 100-day moving averages are $2.830 and $2.769, respectively. The 14-day RSI is 64.28%.
- This morning the EIA released its Weekly Natural Gas Storage Report and showed that working gas in storage rose 60 Bcf in the week ending April 30. Natural gas stocks are 345 Bcf lower than last year at this time, and 61 Bcf below the five-year average.