Petroleum futures looked set to rise for a second session, although gains were slim at under one percent in the overnight session on Tuesday. A bullish note and oil price forecast revision from Morgan Stanley, as well as slow-to-return shale output following the Texas freeze were supportive, whereas strength in the US dollar and weakness in European shares and in US stock market index futures may have been helping cap gains. Market participants looked ahead to US housing market and consumer confidence data for further direction.
Following a bullish note from Goldman Sachs Commodity Research yesterday, Morgan Stanley says it sees Brent crude oil prices rising to $70/bbl in the third quarter, citing declining new coronavirus cases globally, a bottoming out of mobility statistics, and strength in non-OECD country refining activity. The bank raised its forecasts for the second and fourth quarters of the year as well, to $65/bbl (from $55) and $65/bbl (from $60), respectively. Also supportive this morning is news from Reuters that shale oil producers could take two weeks or more to restore over 2mb/d of shut oil production due to the cold snap in Texas, and that some wells may not be restarted as marginal costs of restarting could be prohibitive.
Asian shares mostly strengthened overnight, with the Hang Seng climbing 1.0% higher and the Nikkei gaining 0.5%, although the Shanghai Composite slipped 0.2% lower. China’s House Price Index rose 3.9% year-on-year last month, accelerating from a 3.8% rise in December. In European news, the Harmonized Index of Consumer Prices (HICP) for the Eurozone showed as-expected inflationary pressures in January, with the index up 0.9% year-on-year and the Narrow Core price index up 1.4% year-on-year. Data on the UK labor market were encouraging, as claims were expected up 30,000 in January but instead fell by 20,000, cutting the claimant count unemployment rate down by a surprise 0.3pp to 7.2%. Losses of 0.4% in the FTSE 100 this morning were smaller than the 1.1% drop seen in Germany’s DAX, but larger than a 0.20% dip in the French CAC 40. US stock market index futures were in the red as well, with Dow futures down 0.1%, S&P 500 futures off 0.5%, and Nasdaq futures having fallen 1.5%. Also unsupportive for oil, the US dollar index was up 0.1% after three sessions lower.
The complex strengthened for a second session yesterday, featuring narrowing crack spreads – likely as Gulf Coast refining operations are recovering, with some 1.8mb/d of capacity being restarted this week after 5.9mb/d were impacted during the weather event, per Platts Analytics. Weakness in the US dollar may have provided support to crude futures, whereas trade in equities was generally unsupportive. Brent crude gained $2.33, closing at $65.24/bbl and WTI jumped $2.25 higher to settle at $61.49/bbl. RBOB futures added 3.48 cents for a $1.8417/g settlement, and ULSD (HO) settled at $1.8586/g, up 3.57 cents. According to Platts, the New York Harbor ULSHO barge price differential to spot NYMEX HO weakened by 50 points to -11.75c/g, while the HSHO differential held at -18.00c/g and the ULSD differentials was steady at +0.25c/g. February propane prices fell yesterday, according to Platts. Mt. Belvieu non-LST prices dropped 3.375 cents to 93.375c/g, LST prices fell 1.500 cents to 94.500c/g, and Conway prices tumbled 4.000 cents lower to 110.000c/g.
Natural gas futures weakened 11.6 cents, settling at $2.953/mmBtu yesterday as the temperature outlook moderated and the expected US market balance for next week loosened up. The latest 1-5 day ECMWF outlook calls for above-normal temperatures across the eastern half of the country, with especially large deviations above normal in the Midwest. The 6-10 day forecast sees mixed temperatures in the Midwest, above-normal temperatures in the Northeast, and well above-normal temperatures in the Southeast.
