Feb WTI crude oil (CLG23) this morning is up +0.93 (+1.26%), and Feb RBOB gasoline (RBG23) is up +3.08 (+1.36%). Â Feb Nymex natural gas (NGG23) is up +0.018 (+0.48%).
Crude oil and gasoline prices this morning are moderately higher. Â A weaker dollar today is bullish for energy prices. Â Also, a rally in stocks today shows confidence in the economic outlook and is supportive for energy demand. Â However, crude prices fell back from their best levels after today's news showed that U.S. Nov factory orders posted their biggest decline in 2-1/2 years, and that the Dec ISM services index contracted at its steepest pace in 2-1/2 years.
Feb nat-gas prices this morning recovered from a 1-1/2 year low and are slightly higher as weakness in the dollar sparked some short-covering in nat-gas futures. Â Nat-gas prices initially dropped to a 1-1/2 year low in overnight trade as forecasts for above-normal temperatures in the U.S. undercut heating demand for nat-gas. Â Also, nat-gas has negative carry-over pressure from Thursday after a report from the Rapidian Energy Group said that the Freeport LNG export terminal, which has been closed since an explosion on June 8, will likely be offline "for several more months." Â The closure of the facility has been bearish for nat-gas prices since the reduction in LNG exports has boosted U.S. nat-gas inventories.
Today's U.S. economic news was mixed for crude prices. Â On the positive side, Dec nonfarm payrolls rose +223,000, stronger than expectations of +203,000. Â Also, the Dec unemployment rate unexpectedly fell -0.1 to 3.5%, matching a 53-year low and showing a stronger labor market than expectations of 3.7%. Â On the bearish side, Nov factory orders fell -1.8% m/m, weaker than expectations of -1.0% m/m and the biggest drop in 2-1/2 years. Â Also, the Dec ISM services index fell -6.9 to 49.6, weaker than expectations of 55.0 and the steepest pace of contraction in 2-1/2 years.
Signs of stronger fuel demand in China are bullish for crude prices. Â BNEF reported a congestion index of Chinese road traffic levels in 15 Chinese cities with the most vehicle registrations in the week ended January 4 jumped +32.9% versus a week earlier.
Saudi Arabia's state-controlled Saudi Aramco on Thursday reduced its crude oil prices to customers, which was bearish for crude oil prices. Â Saudi Aramco cut its price of Arab Light grade crude to Asian customers for delivery in Feb by -$1.45 per barrel and also cut prices for its customers in Europe and the Mediterranean region.
Increased OPEC crude output is bearish for oil prices. Â OPEC Dec crude production rose +150,000 bpd to 29.140 million bpd. Â OPEC+ on December 4 decided to keep the group's crude production targets unchanged for January, in line with expectations. Â OPEC+ will meet again on February 1 to discuss its production targets.
Crude oil prices have support after Russia's Deputy Prime Minister Alexander Novak said in late December that Russia might cut production by 500,000-700,000 bpd in response to Europe’s partial oil embargo on Russian oil imports.  The European embargo is having a significant impact, as Bloomberg reports that total oil shipment volume from Russia in mid-December fell sharply by -54%.
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 +11% w/w to 98.50 million bbls in the week ended December 30.
Thursday's EIA report showed that (1) U.S. crude oil inventories as of December 30 were -4.8% below the seasonal 5-year average, (2) gasoline inventories were -5.2% below the seasonal 5-year average, and (3) distillate inventories were -12.2% below the 5-year seasonal average. Â U.S. crude oil production in the week ended December 30 rose +0.8% w/w to 12.1 million bpd, which is only 1.0 million bpd (-7.6%) 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 30 fell by -1 rig to 621 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.
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More Natural Gas News from Barchart
- Nat-Gas Prices Sink on Bearish EIA Report and Delay in Reopening Freeport
- Crude Oil Rebounds on Signs of Improvement in Chinese Fuel Demand
- Nat-Gas Prices Rebound as a Weaker Dollar Spurs Short Covering
- Crude Slumps on Chinese Energy Demand Concerns
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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