Outlook: Energies are trading higher today after OPEC+ confirmed they will ease production cuts by 400,000 bpd in February. Supply disruptions are creating concerns that this number will not be realized with Russia and Libya both experiencing falling production. The US has called for a speedier production increase but OPEC+ has resisted, citing an evenly supplied market. Brent is back above $80 while WTI continues to trade in backwardation over supply tightness with Feb/Mar trading at +22 cents.
Crude
- OPEC+ agrees to increase production by 400,000 bpd for February.
- 130,000 bpd of the production increase will reach the market in January, followed by 250,000 bpd reaching the market in February.
- OPEC+ selected Kuwaiti oil executive Haitham al-Ghais as the groups Secretary General. This position does not set production policy but acts as an intermediary between members.
- Saudi, Kuwait, US Gulf, Colombia, and Libya’s flows have declined collectively by 475,000 bpd due to various disruptions.
- China could maintain border restrictions for the rest of this year as it prepares to host the Beijing Winter Olympics according to Goldman Sachs.
- Oil exports from Venezuela doubled in December from a year earlier as they raise production of hydrocarbons despite US sanctions.
- The Feb22/Mar22 WTI spread settled at +$0.23/bbl yesterday after settling at -$0.38/bbl on Dec 20th.
- Managed money participants crude net length increased by 48k lots through last Tuesday. WTI length increased by 15k lots while Brent length increased by 33k lots.
- As of 10:21 am CST: Brent crude oil up $1.02 at 80.00, US dollar index up $0.04 to 96.253 while the nearby e-mini S&P 500 futures contract is up 2 points to 4788.00.
Diesel
- Diesel is up 4.5 cents at $2.404, trading 7 cents above the 50 day moving average of $2.335.
Gasoline
- RBOB is up 3 cents to $2.28, trading 4.5 cents above the 50 day moving average.
- Spain’s fuel consumption was up 1.4% from November 2019 at 2.37m tons and up 23% y/y. Consumption is at it’s highest level since 2010.
Propane
- Overnight weather runs added 15 HDDs through the two-week forecast.
- Propane is up 1.5 cents to $1.125
Natural Gas
- Total US dry production increased by 1.1 Bcf/d to 92.1 Bcf/d yesterday, primarily driven by Permian production.
- Total US gas demand climbed by 2.2 Bcf/d due to rising industrial and power burn demand.
- TTF prices are up 14% with declining shipments from Russia into Europe.
OPEC+ remains persistent on their stance that Omicron and it’s affects on demand will be short-lived. They expect to see a surplus of 1.4 million bpd for 2022 which may be limiting further production increases. It’s also noted that OPEC+ has failed to meet their targets by 730,000 bpd in October and 650,000 bpd in November.
