Outlook: Energies are higher this morning despite another record day of new Omicron cases yesterday. Governments continue to lean towards dialing back restrictions to strengthen the economy likely due to the lessened severity of the variant. Travel data using Apple’s mobility tracking is showing increases in the majority or European and Asian countries which shows optimism for demand recovery in 2022. Trade is light today ahead of the New Year, but attention will be drawn back in quickly to start 2022 as OPEC+ is set to meet next Tuesday.
- China cuts oil import quota by 11% compared to last year while 40% of the quota went to their three mega-refiners.
- Iran nuclear talks will resume for an 8th round of talk on January 3rd.
- President Biden is set to speak with Russia’s Vladimir Putin in a bid to de-escalate tensions over Ukraine.
- WTI’s Dec 22 – Dec 23 spread expanded to $5 a barrel, an 8 week high.
- U.S. weekly jobless claims fell 8k to 198k with a pre report estimate of 206k.
- U.S. crude output reached 11.8 million bpd last week, the highest level since May 2020.
- Dallas Fed energy survey showed that more than 50% of U.S. Exploration & Production companies expect a higher level of capex next year and 36% expect to produce more oil and gas.
- Worldwide new cases of Omicron rose to a record yesterday of 1.73 million new cases.
- OPEC+ is set to meet Tuesday January 4th and they are expected to continue the path of adding 400,000 bpd of oil production in February.
- As of 10:03 am CST: Brent crude oil up $0.04 to $79.27, the US dollar index up 0.071 to 96.000 while the nearby e-mini S&P 500 futures contract is threatening yet another record high close, up 8.00 at 4792.50.
- BNEF estimates January jet fuel usage around 4.5 million bpd which is 3% lower than the start of the month.
- ULSD futures are up 2.3 cents to $2.4008 cents and continues to trade above the 50 day moving average set at $2.3475.
- After settling above the 50-day and 100-day moving averages yesterday, RBOB is finding added strength with the expiring January contract up 1.34 cents to $2.3912.
- Apple Inc mobility statistics show a rise in mobility on-month in Asia.
- Propane traded in Conway added 2.75 cents yesterday to $1.1275 after a 3.6 million barrel drawdown. Total US propane inventories are nearly 12% below year-ago levels. The largest draw came out of the Gulf region with a decline of 2.8 million barrels while the Midwest region saw a propane stock decline of 366,000 barrels.
- In its natural gas storage report the EIA revealed a 136 bcf withdrawal, near a Bloomberg poll suggesting a 135 bcf withdrawal and greater than the 5-year average 121 bcf withdrawal.
- Natural gas has fallen after the report to test the low range of trade from the last month. Overall inventories at 3.226 tcf are 58 bcf above the 5-year average which has given the market some comfort inventories should be ok as we head toward spring amid a strong production profile and capped LNG exports.
Propane inventories are at the low-end of average for this time of year and with exports expected to remain robust the market will be sensitive to any cold weather shifts into the balance of drawdown season.