Energy Prices Mixed as Below Normal Temperatures Hit US

Tuesday, March 5, 2019

Energy futures are trading mixed near the unchanged mark on Tuesday, featuring a narrowing of the Brent-WTI spread as restart of Libya’s largest oilfield likely weighed on the former, whereas encouraging economic data releases and Chinese stimulus plans were supportive. Market participants looked ahead to US service sector and home sales data for further direction.

Libya’s National Oil Corp. has lifted force majeure at the 315,000 barrel a day El Sharara oilfield, which has been closed since December.  Plans are also in place to repair 20,000 barrel a day of lost production capacity due to vandalism during the blockade. Khalifa Haftar’s Libyan National Army remains, and the eastern-Libya based leader’s sphere of influence has widened significantly with this push.

In economic news, the Caixin General Services PMI for February continued the trend of softening Chinese economic data releases, falling to 51.1 from 53.6 and pulling the Composite PMI down to 50.7 from 50.9. Reuters reports that the Chinese government is targeting GDP growth of 6.0-6.5 percent this year, down from last year’s 6.6 percent growth rate, and that it be implementing billions of dollars in stimulus through planned tax cuts and infrastructure spending. Also supportive were data releases from India and Europe. The Nikkei India Services PMI rose to 52.5 last month, Eurozone retail sales saw stronger than expected growth of 1.3% in January, the Eurozone Composite PMI rose to a higher-than-predicted 51.9 (Germany at 52.8 and France at 50.4, both stronger than expected), and the Italian economy contracted less than expected in the fourth quarter of last year, by 0.1% (consensus was -0.2%). US stock market index futures were in positive territory, but Asian and European markets were mixed.

Crude oil and products futures rose slightly on Monday, settling down from their highs as US stock market indexes turned lower following disappointing US economic data (construction spending) and with a modest appreciation in the US dollar likely also weighing on trade. Brent crude futures settled 60 cents stronger at $65.67 a barrel, WTI crude closed 79 cents higher at $56.59, gasoline futures settled at $1.7490 per gallon, up 1.87 cents and heating oil closed 1.33 cents higher at $2.0143.

The Global Forecast System maintained its two-week heating degree day forecast at 452, well above the 30-year average at 328. The 1-5-day outlook from AccuWeather is predicting below-normal temperatures across most of the country. Although cold temperatures are still expected for the western part of the country, points east of the Mississippi are now expected to see near to above-normal temperatures.

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