Feb WTI crude oil (CLG23) this morning is down -0.85 (-1.08%), and Feb RBOB gasoline (RBG23) is down -0.17 (-0.07%). Â Feb Nymex natural gas (NGG23) is down -0.191 (-4.08%).
Crude oil and gasoline prices this morning are moderately lower, with crude falling to a 1-week low. Â Concern that China's actions to end its Covid Zero policies will lead to a surge in global Covid infections as it reopens its borders is undercutting crude prices. Â Crude maintained moderate losses after weekly EIA crude inventories unexpectedly rose. Â A weaker dollar (DXY00) today is supportive of energy prices. Â
Feb nat-gas dropped to a 10-month nearest-futures low today on the outlook for warm U.S. temperatures to reduce heating demand for nat-gas. Â Maxar Technologies said well above-normal temperatures are expected across the eastern half of the U.S. through January 7. Â Nat-gas prices recovered from their worst levels today after weekly EIA nat-gas inventories fell -213 bcf, a larger draw than expectations of -199 bcf.
Crude oil moved lower today on concern that there could be a global resurgence of Covid after China ended its Covid Zero policies and reopened its borders. Â The U.S. and Italy announced Wednesday that all air passengers from China would be required to test for Covid after almost half of the passengers on two flights from China to Milan were found to be infected with the virus.
Crude oil prices have support after China said that it would reopen its borders from Covid curbs and eliminate quarantine restrictions for inbound travelers starting January 8. Â However, the impact of easing Covis restrictions is limited as soaring Covid infections in China have kept people at home, reducing economic activity and travel. Â In addition, air travel in China remains in a slump as a report from VariFlight shows the number of flights in China on December 22 fell to 42% of 2019 levels.
Crude oil prices have support after Russia's Deputy Prime Minister Alexander Novak was quoted by the state-run Tass news service last Friday as saying that Russia may cut production by 500,000-700,000 bpd in response to Europe’s partial oil embargo on Russian oil imports.  Russia has threatened to retaliate for the European oil embargo and price cap and may be trying to talk oil prices higher.  However, the embargo is having a significant impact, as Bloomberg reports that total oil shipment volume from Russia in mid-December fell sharply by -54%.
TC Energy received approval to restart the Keystone pipeline and targets the full return of the pipeline capacity by the end of this week. Â TC Energy has already restarted several sections of the Keystone pipeline, including the sections between Cushing and the Gulf Coast. Â The pipeline shutdown, which began on December 8, has put downward pressure on U.S. crude oil inventories at Cushing and Gulf ports. Â The Keystone pipeline normally carries more than 600,000 bpd of crude and links oil fields in Canada to Cushing, OK, and to refiners on the U.S. Gulf Coast.
OPEC+ on December 4 decided to keep the group's crude production targets unchanged for January, in line with expectations. Â OPEC crude production in November fell 1.05 million bpd to a 5-month low of 28.79 million bpd.
In a bearish factor, Vortexa reported Monday that the amount of crude stored on tankers that have been stationary for at least a week rose +24% w/w to 84.42 million bbls in the week ended December 23.
Today's weekly EIA inventory report was mixed for energy prices. Â On the bearish side, EIA crude inventories unexpectedly rose +718,000 bbl versus expectations of a -1.2 million bbl draw. Â Also, EIA distillate supplies unexpectedly rose +283,000 bbl to a 10-month high versus expectations of a -1.0 million bbl draw. Â On the bullish side, Â EIA gasoline stockpiles unexpectedly fell -3.1 million bbl versus expectations of a +500,000 bbl build. Â Also, crude supplies at Cushing, the delivery point of WTI futures, fell by -195,000 bbl. Â
Today's EIA report showed that (1) U.S. crude oil inventories as of December 23 were -6.4% below the seasonal 5-year average, (2) gasoline inventories were -4.1% below the seasonal 5-year average, and (3) distillate inventories were -7.2% below the 5-year seasonal average. Â U.S. crude oil production in the week ended December 23 fell -0.8% w/w 12.0 million bpd, which is only 1.1 million bpd (-8.4%) below the Feb-2020 record-high of 13.1 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended December 23 rose by +2 rigs to 622 rigs, modestly below the 2-1/2 year high of 627 rigs posted on December 2. Â U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.
More Natural Gas News from Barchart
- Nat-Gas Prices Plunge as U.S. Production Recovers and Temps Warm
- Crude Prices Tumble as the Dollar Strengthens and Stocks Fall
- Nat-Gas Prices Rise as Frigid Temps Cut U.S. Production and Boost Demand
- Crude Gains as China Reopens and Severe Cold Shutters U.S. Refineries
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.
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