Crude oil and refined products futures were seeing losses of over two percent in the overnight session on Friday amid losses in equities following disappointing economic data out of Japan, the UK, and the Eurozone. Market participants looked ahead to Canadian retail sale and US existing home sales data for further direction, as well as to the weekly petroleum inventory report from the Energy Information Administration (EIA).
The EIA is due to release its inventory report for the week ended January 15 today, and the average of polls conducted by S&P Global Platts and Reuters call for a 1.8mb draw from crude oil inventories to be reported. Product inventories are seen rising, with gasoline stocks up 2.7mb and distillate stock levels up 0.9mb. In supply-side news this morning, Reuters reports that Iranian Oil Minister Bijan Zanganeh says Iranian crude oil exports have risen “significantly” despite US sanctions. On the other hand, Goldman Sachs stated today that “delays in a full return of Iran production would reinforce our bullish oil outlook,” a nod towards the view that the incoming administration is not in a rush to lift sanctions against Iran.
In economic news this morning, Japanese consumer price inflation was negative last month, per a 0.1% monthly and 1.2% yearly decline in the Consumer Price Index. Also discouraging, the flash Nikkei/Markit Composite PMI for January came in at 46.7, down from 48.5 and indicating the contraction in the economy accelerated. The Nikkei fell 0.4% overnight, as did the Shanghai Composite. The Hang Seng took a 1.6% tumble. European data were also unsupportive. UK retail sales growth of 0.3% last month fell well short of consensus at 1.2%, and the flash January Markit Composite PMI came in at 40.6, well below consensus at 45.5 and back down in contractionary territory. The flash Eurozone PMI showed a steeper contraction last month, falling from 49.8 to a lower-than-expected 47.5. The index for Germany fell to 50.8, barely in expansionary territory, while the index for France dropped to 47.0. European shares were falling, with the FTSE 100 down 0.8%, the DAX also having lost 0.8%, and the CAC 40 trading 1.1% weaker. US stock market index futures were also in the red, with Dow futures down 0.8%, S&P 500 futures 0.7% weaker, and Nasdaq futures off 0.6% as of this writing. The US dollar index was flat.
The complex settled mixed and little changed on Thursday, with WTI shedding 18 cents to settle at $53.13/bbl following bearish weekly US crude oil inventories from the API. Brent crude futures added 2 cents, closing at $56.10/bbl. RBOB futures edged up 40 points for a $1.5479/g settlement, and ULSD (HO) settled at $1.6006, up just 2 points. New York Harbor ULSD and ULSHO prices weakened against spot NYMEX, according to Platts, with the ULSD differential down 25 points to -0.35c/g and the ULSHO differential falling 50 points to -10.75c/g. HSHO barges held at 15.75c/g under front-month NYMEX futures. January propane prices continued their tumble yesterday, according to Platts, with Mt. Belvieu non-LST prices falling 50 points to 83.500c/g, LST prices down 25 points to 85.000c/g, and Conway prices dropping another 3.5 cents to 82.750c/g.
Natural gas futures on NYMEX lost 4.8 cents yesterday, settling at $2.491/mmBtu with moderation in the temperature outlook. The latest 1-5 ECMWF outlook sees some parts of the Midwest and Northeast seeing below-normal temperatures, and while the 6-10 day outlook sees below-normal temperatures continuing in the Northeast, the Midwest is expected to see above-normal temperatures, and both regions are expected to see warmer than normal levels in the 11-15 day outlook. The EIA is due to release its weekly natural gas storage report today, expected to show a 174bcf withdrawal from storage that would exceed both last year’s 97bcf drop and the 167bcf five-year average.
