Crude oil and refined products futures were seeing further but modest gains in the overnight session on Tuesday, amid further weakness in the US dollar index and strength in European shares, despite more mixed trade in US stock market index futures and bearish product inventory data from the American Petroleum Institute (API). Market participants looked ahead to US labor market and factory orders data, as well as to the weekly petroleum inventory report from the Energy Information Administration (EIA) for further direction.
The API reported a 1.70mb draw from US commercial crude oil inventories for the week ended January 1, which was closely in-line with the 1.67mb draw predicted by analysts (average of surveys conducted by Reuters and IHS Markit). Whereas this was neutral, data for products were bearish. The API reported a 5.50mb build in gasoline stocks, well above the 1.46mb prediction, and a 7.10mb distillate build – far above the 2.25mb estimate. Although US crude stocks fell overall, API reported a 1.00mb build in Cushing, OK crude oil inventories. With neutral crude oil and bearish products data, the figures were supportive of narrowed crack spreads, but we were not seeing much of that in futures prices as of this writing.
The Japanese economy inched closer towards breakeven last month, per the final Nikkei/Markit Composite PMI, which came in at 48.5 (from 48.1 prior). Also encouraging, the expansion in the Chinese economy accelerated in December according to a rise in the Caixin China Composite PMI from 57.5 to 55.8. The Nikkei slipped 0.4% lower, but the Shanghai Composite rose 0.6% overnight, and the Hang Seng added 0.2%. Data from Europe this morning were less encouraging, as the final Markit Eurozone Composite PMI for December saw a surprise downward revision from 49.8 to 49.1, with the indexes for both Germany (52.0) and France (49.6) both seeing surprise downward revision from the flash estimate. Also discouraging, the CIPS/Markit Composite PMI for the UK saw a surprise downward revision to 50.4. Nevertheless, European shares were strengthening this morning, with the CAC 40 up 0.8% and the DAX up 1.0%. Meanwhile, Dow futures were up 0.4% but S&P 500 futures were off 0.1% and Nasdaq futures had dropped 1.4% lower. US dollar trade was supportive, however, with the index down 0.2% and at fresh multi-year lows.
The complex rallied to gains of between 3.9% (ULSD) and 5.8% (RBOB) yesterday following news that Saudi Arabia would be voluntarily cutting oil production by 1mb/d in February, as well as with strength in US shares and weakness in the US dollar. Saudi Arabia is to produce 8.125mb/d in February, a drop of about 0.84mb/d from its rate of production in November. Brent crude shot up $2.51 to $53.60/bbl yesterday, and WTI settled $2.31 cents stronger at $49.93/bbl. RBOB futures led the way higher, rallying 7.92 cents and settling at $1.4521/g. ULSD (HO) futures climbed 5.69 cents higher to settle at $1.5189/g. According to Platts, New York Harbor HSHO barge price differentials to spot NYMEX strengthened by 3.05 cents to -13.00c/g, while ULSHO differentials weakened by one cent to -9.75c/g and the ULSD barge differential fell by 15 points to -0.25c/g. Spot propane prices strengthened along with crude yesterday. Per Platts, LST prices at Mt. Belvieu rose 25 points to 80.000c/g, non-LST prices added 12.5 points to hit 79.125c/g, and Conway spots jumped one cent higher to 77.250c/g.
Natural gas futures also strengthened appreciably yesterday, gaining 12.1 cents and settling at $2.702/mmBtu amid a stronger two-week degree day forecast. The latest 1-5, 6-10, and 11-15 day outlooks based on the European Model, continue to see mostly above-normal temperatures in both the Midwest and the Northeast, although the 1-5 day outlook for the Northeast is at least more mixed, with near-normal temperatures.
