Brent crude oil and refined products futures looked set for a fourth session lower as of this writing in the overnight session on Tuesday, with an extended rally in the US dollar and weakness in US stock market index futures, despite strength in European shares and slower than expected Russian oil production growth. Market participants looked ahead to Canadian GDP data for further direction, while keeping an eye out for any headlines related to Thursday’s OPEC+ meeting.
In supportive supply-side news, Reuters reports that industry sources indicate harsh winter weather hampered Russian oil producers from restoring output from mature oil fields that were shut due to the OPEC+ output agreement, meaning production did not rise a much as it could have last month.
In economic news this morning, the Japanese unemployment rate held steady at 2.9% in January. However, the Nikkei fell 0.9% and the Hang Seng and Shanghai Composite both dropped 1.2% lower. European shares were seeing modest strength this morning despite mostly discouraging economic data releases. German retail sales contracted 4.5% in January, against expectations for a 1.0% dip, although an upward revision to December sales growth from -9.6% to -9.1% took a little bit of the sting off. The German unemployment rate held steady at 6.0% last month, as expected. Back in the minus column, the flash February Harmonized Index of Consumer Prices (HICP) for the Eurozone rose 0.9% year-on-year, short of the 1.0% expectation. The ECB may be happy to see, however, that Underlying HICP rose 1.1% year-on-year, matching expectations. Germany’s DAX was up 0.5% this morning, as was the CAC 40. The FTSE 100 in the UK was seeing larger gains of 0.7% following encouraging housing market data. The Nationwide House Price Index rose 0.7% last month, beating expectations calling for a 0.3% drop.
Whereas trade in European shares was supportive for crude this morning, US stock market index futures were down, with losses of 0.2% in Dow futures, 0.3% in S&P 500 futures, and 0.4% in Nasdaq futures. Also unsupportive, the US dollar index looked set to extend its rally, having hit its highest levels since February 5 overnight. The index was off of those overnight highs but still up 0.14% as of this writing. Market participants looked ahead to Canadian GDP growth for December, expected to come in at 0.3% after a 0.7% rise the previous month. Data for the fourth quarter as a whole are also due, expected to show a 1.9% quarterly growth rate, slowing from 8.9% in Q3.
Brent crude futures fell for a third session and WTI lost ground for a second yesterday, with the former losing 73 cents to close at $63.69/bbl and the latter dropping 86 cents lower and settling at $60.64/bbl amid a continued rally in the US dollar, despite strength in equities with encouraging economic data releases (mostly manufacturing). RBOB futures shed 76 points, settling at $1.9429/g, while ULSD (HO) dropped 2.39 cents lower for a $1.8192/g settlement price. According to Platts, the New York Harbor ULSD barge price differential to spot NYMEX HO weakened by 85 points to -0.10c/g yesterday, and the ULSHO barge price differential weakened by 75 points to -12.50c/g. The HSHO differential held steady at -18.25c/g. March propane prices, per Platts, made mixed moves yesterday with the Mt. Belvieu to Conway propane price spread normalizing further. Mt. Belvieu non-LST prices gained 2.250 cents, hitting 97.000c/g, and LST prices at the Texas hub rose by 1.750 cents to 96.375c/g. Conway prices tumbled 13.000 cents lower to 92.000c/g.
Natural gas futures on NYMEX were little changed yesterday, edging up 60 points to settle at $2.777/mmBtu. The near-term temperature outlook is supportive for the East Coast, but unsupportive for the Midwest. The ECMWF sees below-normal temperatures across PADD 1, with larger deviations below normal expected in parts of northern New England and upstate New York, while well-above-normal temperatures are expected in much of the Midwest. The latest 6-10 day forecast now calls for above-normal temperatures in both regions.
