Written on: December 3, 2019

Heating Oil Price Report

Tuesday, December 3, 2019

Energy futures are trading mixed near the unchanged mark on Tuesday morning amid mixed trade in global equities. While the US dollar index was weakening slightly (supportive for oil prices), investment bank Goldman Sachs says it sees an “uneventful” three-month extension coming out of this week’s OPEC+ meeting, and Equinor says output from the Johan Sverdrup oilfield has grown to 350kb/d.

Reuters reports that Russian Energy Minister Alexander Novak says that Russia is still finalizing its position ahead of the OPEC+ talks this Thursday and Friday. Separately, Reuters reports that Goldman Sachs says the group is likely to extend the 1.2mb/d output cuts through June, and that “large speculative buying in recent weeks and some expectations for a [deeper/longer] cut suggest that an uneventful 3 month extension is unlikely to provide much upside to current prices.” The bank said it sees Brent crude oil prices trading around $60/bbl next year, with persistent backwardation. In other OPEC+ news, Saudi Arabia raised its January Arab Light official selling price (OSP) for the Asian market by 30 cents to $3.70/bbl above the Oman/Dubai average, a six-year high. The Arab Extra Light OSP to Asia was raised by 70 cents to a $5.80/bbl premium. In other supply-side news, Norway’s Equinor says production at the giant Johan Sverdrup oilfield has reached about 350kb/d, and that the initial capacity ramp to 440kb/d by this summer is progressing well.

Asian stock markets were seeing mixed trade as of this writing, whereas European shares were mostly higher following encouraging economic data. The UK construction PMI for November rose from 44.2 to 45.3, beating the Econoday consensus forecast at 44.0. Also encouraging, the Producer Price Index for the Eurozone for October showed a 0.1% increase in producer prices, against expectations for a 0.1% drop. It is otherwise a quiet day on the economic calendar, and market participants will have to look elsewhere for further direction. US stock market index futures were seeing losses of 0.3-0.4% as of this writing.

Crude futures strengthened in thin, post-holiday trade yesterday amid talk of a potential deepening of the OPEC+ output cuts and weakness in the US dollar. Gains may have been limited by weakness in US equities (following disappointing US economic figures) and data showing continued Russian under-compliance with the OPEC+ agreement. Brent settled 43 cents higher at $60.92 a barrel, WTI climbed 79 cents higher to settle at $55.96, gasoline futures fell 1.77 cents lower to close at $1.5733 per gallon and heating oil settled 75 points stronger at $1.8860. Natural gas futures rose 2.1% to settle at $2.329 per MMBTU.