Petroleum futures were seeing losses of over one percent in the overnight session on Friday amid weakness in global equities and strength in the US dollar. Market participants looked ahead to a large set of US economic data ahead of the holiday weekend.
In supply-side news this morning, Reuters reports that US shale oil producers are hedging future output amid the relatively strong prices we have been seeing. Petrie Partners says those producers that are hedging are likely doing so on 15-20% of output at a time, as they weigh hedging current levels against the hope of yet higher prices.
Chinese home price appreciation slowed in December from a year-on-year rate of 4.0% the prior month to 3.8%. The Shanghai Composite closed marginally higher, while the Hang Seng strengthened 0.3%. The Nikkei, on the other hand, fell back 0.6% and the Asia Dow lost 0.2%. Economic data from Europe this morning were neutral to supportive. The Eurozone merchandise trade surplus narrowed from E25.2bn in October to E25.1bn in November. Consumer price inflation in France was confirmed at 0.2% in December, as expected. November industrial production growth in the UK was a miss, falling 0.1% against expectations for a 0.5% rise, but the UK economy saw a smaller than expected contraction of 2.6% that month (expectations called for a 4.3% drop) even after an upward revision of 0.2 percentage points to the October rate of GDP growth to 0.6%. Nevertheless, the FTSE 100 was down 0.8% this morning, the CAC 40 had dropped 0.9% lower, and the DAX was down 0.6%. US stock market index futures were falling, with Dow futures down 0.4%, S&P 500 futures down 0.3% and Nasdaq futures off 0.2%. Also unsupportive for oil, the US dollar index had shed 0.2% as of this writing. Market participants looked ahead to figures on New York area manufacturing, national industrial production, consumer sentiment, and – likely today’s headline economic item – retail sales for December.
Crude oil and refined products futures opened in the red yesterday, but recovered later as equities turned higher, and as the US dollar index lost ground. Brent crude added 36 cents to close at $56.42/bbl and the Brent-WTI spread narrowed as WTI futures climbed 66 cents higher, settling at $53.57/bbl. RBOB futures edged up 51 points for a $1.5539/g settlement, while ULSD (HO) climbed 2.05 cents higher to settle at $1.6194/g. New York Harbor ULSD barge prices weakened by 10 points against spot NYMEX to a differential of -0.30c/g, according to Platts, while ULSHO and HSHO differentials were steady at -9.50c/g and -15.75c/g, respectively. Propane prices extended their rally yesterday, with Platts reporting a 4.5-cent jump in LST prices at Mt. Belvieu to 97.000c/g, a 3.875-cent jump in non-LST prices at the hub to 94.750c/g, and with Conway prices rocketing 6.625 cents higher to 97.000c/g. Platts suggest the strong propane export market could be driving some of the LST premium over non-LST, with a source saying Enterprise could “still be trying to price to export.”
Natural gas futures fell 6.1 cents yesterday, settling at $2.666/mmBtu with a slightly weaker degree day forecast for the next two weeks and a loosening picture of the US market balance for next week, despite a supportive weekly EIA storage report. The latest 1-5 day ECMWF outlook continues to see above-normal temperatures in consuming regions. The 6-10 day forecast also sees above-normal temperatures in the Midwest and for much of the East Coast, but parts of the Northeast are expected to see below-normal temperatures, a supportive development. As of this writing, natural gas futures had gained 3.1%.
