Energy Futures Flat Following Bullish Inventory Reports

Thursday, January 2, 2020

Energy futures are trading flat to higher on Thursday following bullish crude oil inventory figures from the American Petroleum Institute (API) released after the close on Tuesday and amid strength in global equities following a large set of encouraging data on the manufacturing sectors of various countries.  A rebound in the US dollar index after a five-session decline may have been helping limit gains.  Market participants looked ahead to US labor market and manufacturing data releases for further direction.  Weekly inventory figures from the Energy Information Administration are due tomorrow because of the holiday yesterday.

The API reported a sharper than predicted withdrawal from US crude oil inventories of 7.80mb whereas the average of analyst polls conducted by Reuters and Platts put expectations at 3.13mb.  API data were mixed for products, as heating oil saw a slightly larger than expected build of 2.80mb (expectations were at 2.52mb) and gasoline stocks saw a small surprise draw of 0.78mb against expectations for a 2.90mb build.  According to API, Cushing, OK crude oil inventories fell further last week, by 1.40mb.

Asian shares strengthened and European stock market indexes were seeing gains of between 0.77% (DAX) and 1.28% (FTSE MIB and IBEX 35) as of this writing.  Futures for the major US stock market indexes were up by over 0.5%.  The Caixin manufacturing PMI for China for last month came in at 51.5, beating expectations at 51.4 and indicating continued expansion in the sector.  The Markit/Nikkei manufacturing PMI for India came in at 52.7, up from 51.2 in November.  Eurozone manufacturing slowed last month, with the PMI falling from 46.9 to 46.3, but this beat expectations calling for a sharper slowdown and a 45.9 print.  The index for Germany fell to 43.7, beating the 43.4 consensus, and the index for France beat expectations at 50.3, coming in at 50.4.  The CIPS manufacturing PMI for the UK came in at 47.5, just above expectations at 47.4, but down from 48.9 in November.  Market participants looked ahead to weekly US jobless claims (seen holding at 222,000) and the Markit manufacturing PMI for December (consensus at 52.5) for further direction.

The complex weakened in thin pre-holiday trade on Tuesday with WTI crude settling 62 cents weaker at $61.06 a barrel, Brent crude lost 67 cents to close at $66.00, gasoline dropped 3.05 cents to settle at $1.6978 per gallon, heating oil settled at $2.0283 and natural gas ended the year at 2.189 per MMBTU.

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