Outlook: Saudi Arabia increased the price of its oil to customers in Asia and the U.S., a signal demand remains strong despite concerns about the omicron variant. Equities are stronger, assiting crude and products higher. Natural gas is down sharply amid much warmer than normal weather across teh country in the 6-10 and 11-15 day models.
Crude
- South Africa’s omicron breakout isn’t causing a learge increase in hospitalizations.
- Negotiations with Iran regarding its nuclear program ended on Friday without significant progress. Iran’s foreign ministry said they can’t be expected to back off nuclear work until clarity is reached on how U.S. sanctions would be lifted.
- The Federal Reserve is expected to speed up the bond tapering process as unemployment falls, which should lead to a clearer path on raising interest rates.
- OPEC+ made a decision last week to proceed with adding 400,000 bpd in January but left it open to revise at any time depending upon the demand impacts of omicron.
- The TransMountain Pipeline in Canada that provides oil to refineries in the PNW has restarted at limited capacity after being down for weeks due to widespread flooding in British Columbia and Washington. More work on the 300,000 bpd pipeline is needed before the line can reach full capacity.
- The US oil rig count was unchanged last week according to Baker Hughes. Total rigs remained at 467.
- Long only oil ETF’s saw an inflow of $500 million last week, the biggest weekly addition since May 2020.
- There are no major economic reports today.
- As of 10:36 am CST: Brent crude oil up $1.89 to $71.40, US dollar index up 0.222 to 96.339 while the nearby e-mini S&P 500 futures contract is up 45.50 points to 4582.75.
Diesel
- Nearby ULSD futures are up more than 4 cents. On a continuous chart (see below) ULSD has consolidated near its 200-day moving average, which could be a sign of a bottom from the recent sell-off.
- June 2022 ULSD futures are off nearly 40 cents from their peak in October, which could be considered a buying opportunity for end users looking to cover 2022 physical needs.
- Energy Aspects cut its demand forecast for jet fuel in December by 200,000 bpd globally due to travel restrictions in reaction to the omicron variant.
Gasoline
- Nearby RBOB is nearly 5 cents higher as the deep fear about the omicron variant that gripped the market on Black Friday seems to be subsiding.
Propane
- Warmer weather in the forecast and to this point in the season has propane as a percentage of crude oil coming down. The current percentage is 60%, but still above the 5-year average near 50%.
- We knew propane and natural gas would be heavily driven by weather considering stocks lagged the 5-year averages coming into the heating season. As it has turned out, warmer weather that limits heating demand has pressured propane. Prompt propane trades near $1.00 this morning in Conway.
Natural Gas
- A short cold snap in the near term shifts quickly with warmer weather forecast across the country and this has natural gas futures sharply lower.
Continuous Daily ULSD: After touching trendline support last week, nearby ULSD has risen back above its 200-day moving average.
