Written on: February 1, 2023

Energy Price Report

Wednesday, February 1, 2023

Crude Futures are Trading in the Black

Crude futures are trading in the black while heating oil and gasoline futures are seeing losses as of this writing Wednesday morning.  Gains in European shares and weakness in the US dollar are supporting factors, while losses in US stock market index futures and bearish crude oil and distillates stock data from the American Petroleum Institute (API) likely weigh on the price action.  Market traders are awaiting US economic data in the form of the ADP Employment Report, the final S&P Global Manufacturing PMI, construction spending, the Job Openings & Labor Turnover Survey (JOLTS), and the weekly EIA inventory report for further direction.  Traders are also looking ahead to OPEC+ meeting and the FOMC policy announcement, with expectations calling for a 25 basis point rate hike.

API Reported a Build

The API reported a 6.30mb build in US crude oil stockpiles for the week, far exceeding expectations at 0.19mb (average of polls by Reuters and the Wall Street Journal).  Data for distillates are bearish as the agency reported a surprise 1.50mb build in distillate stockpiles against expectations calling for a 1.15mb draw.  Gasoline figures were unsupportive as the API reported a larger-than-estimated build of 2.70mb (vs 1.17mb).

Asian Markets

Asian shares closed flat to higher overnight with the Nikkei edging up 0.1%, the Shanghai Composite adding 0.9%, and the Hang Seng jumping 1.1% higher. The Japanese Jibun Bank Manufacturing PMI for January came in at 48.9, unchanged from the month prior. The Caixin China Manufacturing PMI rose from 49.0 to 49.2 last month, closer to the 50 breakeven point but below expectations at 49.5. The S&P Global/Nikkei Manufacturing PMI for India came in at 55.4 last month, down from 57.8 in December.

European Markets

In European news, the final S&P Global Manufacturing PMI for the Eurozone for January came in at 48.8, matching the Econoday consensus. The index for Germany beat expectations by coming in at 47.3 (vs 47.0), while the index for France came in at 50.5, below the 50.8 expectation but still indicating an expansion in the sector. The flash Harmonized Index of Consumer Prices (HICP) for the Eurozone showed prices rose 8.5% year-on-year (y/y) last month, below the 9.1% forecast. Narrow core prices rose 5.2% y/y, just above the 5.1% consensus. The unemployment rate in the Eurozone for November was revised up from 6.5% to 6.6% and held steady in December, above the Econoday consensus at 6.5%. As of this writing, the CAC 40 was up 0.2% and the DAX had added 0.4%. In UK news, the final CIPS/S&P Global Manufacturing PMI for last month came in at 47.0, above expectations at 46.7. The Nationwide House Price Index for January showed house prices falling 0.6%, while forecasts called for a 0.3% dip. The FTSE 100 was up 0.2%. On the other hand, US stock market index futures were seeing losses of between 0.1% (Nasdaq futures) and 0.4% (Dow futures) as of this writing. Back in the supportive column for crude, the US dollar index was down 0.2% this morning.

Refined Fuels

Crude futures settled mixed yesterday with gains in US shares and weakness in the US dollar likely supporting.  Brent crude  futures fell 41 cents to close at $84.49 a barrel, while WTI crude rose 97 cents to $78.87 a barrel, gasoline futures added 4.46 cents to settle at $2.5435 per gallon, heating oil jumped 7.15 cents higher to close at $3.1823 per gallon and natural gas futures edged up 70 points to $2.684 per MMBTU.

Weather Outlook

The latest 1-5 day forecast (EC) continues to call for below-normal temperatures across the majority of the country. The 6-10 and 11-15 day outlooks call for above-normal temperatures across the eastern half of the country.