Outlook: The energy complex continues to strengthen into this morning on the back of clarity around Fed bond-tapering intentions, a weaker dollar and a supportive weekly EIA report from yesterday. Further Omicron research in South Africa has developed showing two doses of Pfizer being 70% effective against severe illness and hospitalizations. Positive vaccination news may support holiday travel in the coming weeks and could suppress the economic effects of surging case numbers.
Crude
- Europe’s crude imports from the U.S. Gulf are set to rise to a six-month high in December.
- U.S. weekly jobless claims rose 18k to 206k, in line with the 200k estimate.
- U.S. November oil and gas drilling rose 0.7% month-over-month.
- Philadelphia Fed Index fell to 15.4, below the 29.1 estimate.
- A Wood Mackenzie report showed the U.S. pipeline capacity utilization is around 50%, compared to 60-70% headed into early 2020 pre pandemic.
- Energy Aspects expects China’s oil refining capacity to increase in 2022, with new plants more than offsetting cuts at privately owned “teapot” refineries.
- A Bloomberg Intelligence survey in November showed 82% of 122 respondents believe Brent will be above $70/bbl at the end of 2022 and a third of respondents believe it will be over $90/bbl.
- As of 10:15 am CST: Brent crude oil up $1.06 to $74.94, US dollar index down 0.360 to 96.151 while the nearby e-mini S&P 500 futures contract is down 1.75 points to 4,707.25.
Diesel
- A larger than anticipated drawdown in U.S. distillate stocks of 2.85 million barrels last week helps provide a more than 2 cent prop to ULSD futures this morning.
- Higher Russian diesel production is being absorbed by strong domestic demand.
- Bloomberg NEF’s flight departure index stalled at 49% in early December, unable to return to the high of 70% registered last year.
Gasoline
- Surging gasoline demand before the holiday season suggested concerns about the new virus variant weren’t keeping drivers off the roads. The EIA showed U.S. gasoline demand rose more than 500,000 bpd last week to 9.472 million bpd, a seasonally strong demand figure.
Propane
- A weekly draw of 2.4 million barrels last week exceeded expectations for a draw in the 1 million barrel range. With crude higher and on the back of a supportive inventory report, propane values are up near 2 cents this morning.
Natural Gas
- The EIA natural gas storage report released this morning showed an 88 bcf withdrawal from storage, near consensus estimates.
- European power prices surged to record on unplanned French reactor halts.
- European Dutch TTF natural gas trades above $45 compared to the nearby U.S. Henry Hub futures price of $3.900. U.S. natural gas prices have held back compared to international values because of a limit on U.S. Liqufied Natural Gas export capability.
Continuous Daily ULSD: It appears ULSD is on its way back to test its 100-day moving average at 2.2739 with current trade up nearly 4 cents on the day to 2.2604. First support may be found near yesterday’s low 2.1873.
