Outlook: Energies are looking for direction this morning as we close out January. Geopolitical concerns remain in the spotlight as Russia continues to move medical supplies to the border. The US will look to finalize sanctions on Russia as communication and progress in negotiations have been unsuccessful. OPEC+ will meet on Wednesday and is expected to move forward with a 400,000 bpd increase despite its members struggling to meet previous production targets. While overproduction in September and November has made up for some of the shortfalls, a trend of underperforming will be closely monitored.
Crude
- The head of NATO said on Sunday that Europe needed to diversify its energy supplies as Britain warned it was “highly likely” that Russia will invade Ukraine according to a Reuters report.
- Russia has reportedly shipped medical supplies to the border in preparation for an invasion.
- The US and allies are close to finalizing sanctions on Russia if the invasion takes place.
- The UAE said it intercepted a ballistic missile fired by Yemen’s Houthi group while they hosted Israel's President.
- Kazakhstan’s oil output remained above targets for January despite unrest earlier in the month.
- Ecuador’s heavy crude pipeline was damaged by a rockslide and has temporarily suspended flows according to Bloomberg.
- OPEC+ is expected to stick with their plan to add 400,000 bpd in oil production for March.
- Oil prices are on track for a 17% gain for the month of January.
- As of 10:00 am CST: Brent crude oil up $0.86 to $90.89, US dollar index down $.405 to 96.872 while the nearby e-mini S&P 500 futures contract is up 35.5 points to 4458.75.
Diesel
- February ULSD futures expire today and some of the inverse is being taken out with February down 2.3 cents to 2.7625 while the March is 40 points lower to 2.7084.
- Over 1,400 flights were canceled due to the winter storm in the Northeast.
- US diesel exports rose to 1.142 million bpd in November, up from 1.093 million bpd in October.
Gasoline
- US weekly imports of European gasoline rose to the highest level so far this year according to Bloomberg ship tracking data.
- US gas exports rose to 930,000 bpd in November, up from 847,000 bpd in October.
Propane
- Propane is up 2.5 cents at $1.30 at Conway and up 1 cent to $1.31 at Belvieu.
- Persistent below average temps and tight inventories will be key market drivers as we enter February.
Natural Gas
- A winter storm in the Northeast and cold weather expected to settle over Texas has helped provide a lift to natural gas prices, however with current trade at 4.735, the March contract is well off its earlier high of 5.057.
- Baker Hughes reported the total US natural gas rig count climbed by 2 last week.
- The IEA quarterly gas report has US gas demand increasing by 1% in 2022.
- US demand fell over the weekend driven by lower Rescomm demand.
OPEC+ Production: OPEC+ plans to increase production by another 400,000 bpd in March. The image below illustrates the difficulty some of its members are having keeping pace with production targets and as a result have fallen short three of the past five months.
