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Energy Price Report

Thursday, February 20, 2020

The  complex is trading flat to higher on Thursday amid supportive economic data releases, expansionary Chinese monetary policy, and signs of a potential slowdown of the coronavirus outbreak in Hubei province, despite weakness in European stocks and US stock market index futures and a continued rally in the US dollar, as well as confirmation that the OPEC+ meeting will not be pushed up. Inventory data from the American Petroleum Institute (API) were supportive for products but unsupportive for crude.

 

Reuters reports that Russian Energy Minister Alexander Novak stated today that “there isn’t anything extraordinary enough” to reschedule the upcoming March meeting, and that Russia will “see how the situation develops, what will happen on the market, what forecasts there will be” in determining its position on additional output cuts. Earlier this month, an OPEC+ technical panel recommended an additional 0.6mb/d in output curbs.

The API reported a 4.16mb build in US crude stocks, well above the 2.90mb predicted by analysts (Platts, Reuters poll average). This, along with supportive products data was supportive for wider crack spreads. Gasoline inventories saw a surprise 2.70mb drop (0.37mb build predicted) per API, and distillate stockpiles saw a larger than predicted draw of 2.60mb (1.53mb was the expectation).

In supportive news this morning, Hubei province in China reported 349 new cases for yesterday, down from 1,693 the previous day and the lowest since January 25. There were 279 unconfirmed cases that were discounted without explanation, but 628 would still be a large decline. There were 108 deaths reported, down from 132 the previous day. Also supportive, the Chinese central bank cut the one-year loan prime rate (LPR) by 10 basis points (bp) to 4.05% and the five-year LPR by 5bp to 4.75%. The Shanghai Composite climbed 1.84% higher and the Nikkei gained 0.34%, but the Hang Seng slipped 0.16% lower.

European shares were trading flat to weaker as of this writing despite generally encouraging economic data releases. The GfK consumer climate index for Germany came in at 9.8, beating expectations at 9.7, and producer price inflation (PPI) last month of 0.2% year-on-year beat consensus calling for a 0.4% drop. French consumer prices inflation, per the CPI, of 1.5% year-on-year matched expectations. In the UK, the CBI Industrial Trends Survey index came in at -18 this month, just above expectations at -19, and retail sales growth of 0.9% in January topped forecasts at 0.7%. Additionally, December sales were revised up from -0.6% to -0.5%. Up ahead on the economic calendar today were weekly US jobless claims, the Philadelphia Fed survey, and flash Eurozone consumer confidence.

Petroleum futures rallied on Wednesday amid strength in global equities and supportive economic data, despite a continued rally in the US dollar. Brent crude closed $1.37 higher at $59.12 a barrel, WTI crude gained $1.24 to settle at $53.29, gasoline futures jumped 4.85 cents higher to settle at $1.6633 per gallon, heating oil settled up 3.44 cents at $1.7068 per gallon and natural gas futures fell 2.6 cents to settle at $1.955 per MMBTU.

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