Crude oil and refined products futures were seeing gains of over one percent in the overnight session this morning, amid the possibility of a 0.5mb/d OPEC+ output cut next month and weakness in the US dollar, despite weakness in European shares and in US stock market index futures. Market participants looked ahead to the outcome of the OPEC+ output policy meeting and to data on the US manufacturing sector for further direction.
Reuters reports that it has seen an internal OPEC+ document suggesting a 0.5mb/d output cut next month, as part of a set of scenarios under consideration. Output could instead be held steady, or output could be increased by 0.5mb/d as Russia is reportedly pushing for. Geopolitical tensions surround Iran may also have been supportive. The country has resumed enrichment of 20% purity uranium at its Fordow facility and has also seized a South Korean vessel on claims that the South Korean government is holding $7bn of Iranian funds hostage.
The US dollar index was down 0.2% as of this writing, which is supportive for dollar-denominated assets such as oil. Meanwhile, however, European shares were falling despite encouraging German economic data releases, perhaps with the spread of the new coronavirus strain weighing on things. German retail sales grew 1.9% in November, a positive surprise as a 2.0% drop had been expected. The German unemployment rate held steady at 6.1% last month, consistent with expectations. Nevertheless, the DAX was down 0.80% this morning, and the CAC 40 in France had dropped 0.9%. The FTSE 100 in the UK was off 0.2%. US stock market index futures were seeing losses of under 0.3% as of this writing. Market participants looked ahead to the ISM Manufacturing Index for December, due at 10:00am and expected to slip from 57.5 in November down to 56.5.
The complex fell across the board yesterday, with weakness in US shares and as OPEC+ decided to take another day to deliberate on its output policy for February. Brent fell 71 cents to close at $51.09/bbl, and WTI settled 90 cents weaker at $47.62/bbl. RBOB futures led the way down, perhaps with weakening demand expectations given the new coronavirus strain and tightening restrictions, falling 3.72 cents to settle at $1.3729/g. ULSD (HO) settled 2.20 cents weaker at $1.4620/g. According to Platts, movements in New York Harbor distillate barge differentials to NYMEX were mixed yesterday. HSHO barge differentials held steady at -16.05c/g, but ULSHO barge prices strengthened by 50 points against futures to -8.75c/g, whereas the ULSD differential weakened by 15 points to -0.10c/g. Spot propane prices, according to Platts, rallied yesterday. Mt. Belvieu LST prices shot up 5 cents to 79.750c/g, non-LST prices jumped 4 cents higher to 79.000c/g, and Conway prices strengthened 3.75 cents to 76.250c/g. Platts says there is strong global demand for propane, with one source saying that “Netbacks for LPG cargoes to the East are really strong.”
NYMEX natural gas futures gained 4.2 cents on Monday, settling at $2.581/mmBtu with an upward revision to the two-week degree day forecast (GFS). As of this morning, however, the latest ECMWF 1-5, 6-10, and 11-15 day outlooks calls for mixed and mostly above-normal temperatures in the Northeast and above-normal temperatures in the Midwest, especially over the next 5 days.
