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NEWS & ANALYSIS
Petroleum futures were just south of the unchanged mark as of this writing in the overnight session on Tuesday, amid flat-to-weaker trade in US and European shares, despite news that OPEC+ is considering an output cut extension of up to six months, and despite a weaker US dollar index.
Reuters reports that OPEC+ sees oil inventories continuing to fall next year, if producers extend the current level of output cuts for an additional three months or more. As of now, OPEC+ is set to increase output by 2mb/d in January, but the recovery in demand looks threatened by the resurgence of the coronavirus. Reuters reported this morning that state governors from New Jersey to Iowa, Ohio, and California have announced actions to combat the spread of the coronavirus. Iowa is limiting indoor gatherings to 15 people, and closing bars by 10pm, and the city of Philadelphia is banning indoor gatherings of any size, excluding individuals who live together. The OPEC+ Joint Ministerial Monitoring Committee meets today and could make a policy recommendation. The OPEC+ meeting is set for November 30 and December 1.
Shares in Asia mostly strengthened overnight, following gains in the US market. The Nikkei rose 0.42%, and the Hang Seng added 0.13%, although the Shanghai Composite slipped 0.21% lower. European shares were mostly weaker this morning, with the CAC 40 and DAX both down 0.3%, while the FTSE 100 had dropped 1.1% lower. Futures for the major US stock market indexes were mixed but mostly lower. While Nasdaq futures were up 0.3%, S&P 500 futures were down 0.5%, and so were Dow futures. Market participants looked ahead to Canadian housing starts data for October, US industrial production for October, the NAHB US Housing Market Index for this month, and to today’s headline economic item – US retail sales for October – for further direction.
The complex rallied on Monday amid news of positive results from Moderna’s COVID vaccine, following recent positive results on Pfizer’s vaccine. Talk of postponing the raise in the OPEC+ output ceiling was also supportive, as was strength in US and European shares. Brent crude climbed $1.04 higher, closing at $43.82/bbl, and WTI strengthened $1.21, settling at $41.34/bbl. RBOB settled at $1.1468/g, up 2.14 cents, and ULSD (HO) settled 2.47 cents stronger at $1.2289/g. New York Harbor distillate barge cash differentials were mixed, according to Platts, as ULSHO differentials weakened by 50 points to -8.75c/g whereas ULSD differentials strengthened by 20 points to -0.65c/g yesterday. HSHO barge prices held steady at 15c/g under spot NYMEX. Propane saw flat-to-higher trade yesterday, according to Platts, as Conway prices held steady at 54.000c/g, while Mt. Belvieu LST prices rose by 12.5 points to 55.375c/g and non-LST prices strengthened by 25 points to 56.000c/g.
Natural gas futures fell fairly sharply on Monday, dropping just under 10% or 29.8 cents to settle at $2.697/mmBtu with a weakening heating degree day forecast and loosening picture of the US market this week. The latest ECWMF 1-5 day outlook sees below-normal temperatures along the eastern coast of the US, but mostly above-normal temperatures elsewhere, and both the 6-10 and 11-15 day forecasts call for above-normal temperatures for both the Midwest and the East Coast.