Outlook: Energies are seeing modest gains across the board to start the morning. The API reported a larger than expected draw yesterday while products saw significant builds. The EIA will look to confirm inventories this morning with Reuters estimating a 3.3 million barrel draw for crude, 1.8 million barrel build for gas, and a 1.5 million barrel build for distillate. Omicron now makes up for nearly all of the covid cases in the US however the market continues to shrug off the surging case numbers as hospitalizations remain low. The dollar is lower today, adding support to energies.
Crude
- The EIA will report inventory numbers at 9:30am cst. Yesterday afternoon the API estimated US crude stocks fell by 6.43 million barrels last week. A Reuters poll suggests today we could see a 3.3 million barrel US crude drawdown.
- Two armed drones were shot down by Iraqi forces as they approached the Ain al-Asad air base, which hosts U.S. forces. This has been blamed on Iran, which could add tension to ongoing nuclear negotiations.
- OPEC+ has resumed roughly 2/3 of the production that was paused in the beginning of the pandemic.
- OPEC added 90,000 bpd in December with the increase in Saudi Arabia production offset by losses in Libya’s production.
- Libya’s oil production was down by 70,000 bpd to 1.06 million bpd in December and is projected to drop as low as 700,000 bpd.
- There’s growing unrest in Kazakhstan over fuel prices and political stagnation. Kazakhstan controls 2% of global crude production however no disruptions have yet been reported.
- Barclays Plc sees Brent crude averaging $80 a barrel in 2022 and expects OPEC+ to slow production to 200,000 bpd later this year. Current spread would have WTI crude averaging $77 a barrel.
- Omicron cases made up 95% of all US covid-19 cases for last week, up 77% from the previous week.
- Adults in ICU beds are at 64% of what they were last winter despite cases near double.
- China continues to introduce stricter restrictions and lockdowns with their Covid-Zero policy.
- FOMC meeting minutes are due at 1:00 pm CST.
- As of 9:10 am CST: Brent crude oil up $1.30 at 81.30, US dollar index down 0.319 to 95.943 while the nearby e-mini S&P 500 futures contract is down 5.00 points to 4,779.25.
Diesel
- Yesterday afternoon the API estimated US distillate stocks fell 4.4 million barrels last week. A Reuters estimate for today’s EIA report suggests a 1.5 million barrel build.
- Global passenger jet fuel demand rose by 1.1% week-on-week.
- US passenger numbers decreased by 2.8% week-on-week and are at 84% of 2019 levels.
- Yesterday afternoon the API reported a build of 7.1 million barrels last week. A Reuters poll suggests today the EIA could show a 1.8 million barrel build.
Propane
- US propane stocks are estimated to fall 2.14 million barrels in the week ended Dec 31, according to an OPIS survey.
- Propane is down $.0075 to $1.1125 to start.
Natural Gas
- US gas demand is expected to uptick 3 Bcf/d today after falling by 7 Bcf/d yesterday.
- Overnight weather runs removed 4 HDDs through the two week forecast.
- Dutch TTF prices are up 4% this morning.
Natural Gas has found a trading channel between $3.60 and $4.00 throughout December and into January. Conflicting weather in the US will continue to provide rangebound volatility. The 200 day moving average will act as resistance.
