We kickoff Super Bowl Monday with ISM Non-Manufacturing Index at 9:00 A.M. Central followed by Export Inspections at 10:00 A.M. Informa Economic, a private analytics firm lowered estimates on Corn & Soybean crops in Argentina. They pegged the Corn crop at 37 million tonnes, down 5 million from its prior forecast, noting below normal rainfall. The Soybean production down to 51 million tonnes, down 3.5 million tonnes from the previous estimate while raising the Wheat crop to 18.5 million tonnes up from 18 million previously. On Thursday we will have the February USDA report. All the news did not spillover to the futures markets with the March Corn currently trading at 358 which is 3 ½ cents lower. The trading range has been 359 ½ to 358.
On the Ethanol front the February contract moves closer to expiration, while the March contract is currently trading at 1.428 which is .015 lower. The trading range has been 1.429 to 1.428 with 3 contracts traded and Open Interest at 1,585 contracts. The market is currently showing 1 bid @ 1.434 and 1 offer @ 1.445.
On the Crude Oil front we are trading a little easier as a higher U.S. dollar, lower Stock Market and Interest Rise on investors’ minds. We are hearing whisper numbers of draws on tomorrow’s API Energy Stocks. In the overnight electronic session the March Crude Oil is currently trading at 6485 which is 60 points lower. The trading range has been 6540 to 6462.
On the Natural Gas front the market is trading lower with the March contract las at 2.806 which is 4 cents lower. The trading range has been 2.880 to 2.801 so far. Weather forecast differ of how long we will be blanketed with Arctic weather but seem to agree on a below-normal cooler March as we inch closer to spring.
— Daniel Flynn
The Energy Report: Good news bad news
Oil and the stock market took great red hot economic news and tried to turn it into bad news. Red hot economic data, unlike anything we have seen in years raised fears that the Federal Reserve would have to move quickly and raise interest rates. Yet, what the economic data is saying about potential future energy demand is almost mindboggling and the fracker better get fracking as we may have a hard time meeting future demand.
Consider just the Atlanta Fed’s projection that the U.S. economy, in the first three months of 2018, will grow at 5.4% setting the stage for its best quarter since late 2009. This comes as the U.S. economy added 200,000 jobs last month, and wages for workers grew at 2.9%, the fastest pace since June 2009. The unemployment rate is at 4.1%, the lowest since 2000. No wonder consumer confidence is on the rise.
U.S. manufacturing increased for 17 months in a row as the January PMI registered 59.1 compared with a seasonally adjusted reading of 59.3 in December. That means oil demand in the U.S will remain near record highs and will also drive record demand in Europe and Asia.
Reuters is reporting that Asia’s fuel demand will grow by 2 percent in 2018 as the region’s economies expand at a healthy level, forcing refiners to upgrade and install new capacity, energy consultancy Wood Mackenzie said. In a demand environment in which overall global oil consumption is expected by the International Energy Agency (IEA) to grow by below 1.5 percent a year, Asia has become the focal point in finding new customers. Wood Mackenzie said China and India alone represent 40 percent of global demand growth.
Asia’s demand to refine crude oil into fuel products like gasoline and diesel will average 34.5 million barrels per day (bpd) in 2018, up 630,000 bpd from the year before, Wood Mackenzie senior research analyst Joe Willis said in a media briefing in Singapore. To meet this increase in demand, Asian refiners are expected to increase crude oil distillation capacity, although Willis said that the bulk of new investments would only be ready in the second half of the year.
U.S. Oil demand is already on fire and many will look to tomorrow’s Energy Information Administration (EIA) Short Term Energy Outlook! Last month they said that total U.S. petroleum and other liquid fuels consumption was going to average a hefty 20.3 million barrels per day (b/d) in 2018, an increase of 470,000 b/d (2.4%) from the 2017 level. Yet, recent economic data suggests they will have to raise that. Even as Exxon Mobil Corp sees global oil demand dropping sharply by 2040 if regulations aimed at limiting the impact of greenhouse gas emissions on climate are fully implemented, the reality is that for the foreseeable future the global oil producers will struggle to keep up with demand growth.
There is also geopolitical risk. The AP Reports that Secretary of State Rex Tillerson said Sunday that the U.S. is still considering restricting the sale of oil from crisis-torn Venezuela. Tillerson said in Argentina’s capital that the U.S. wants “free, fair, and verifiable elections” in Venezuela, and wants to apply enough pressure to end the crisis in the South American country. The government there has faced widespread criticism over its decision to push up presidential elections under conditions that opponents say overwhelmingly favor President Nicolas Maduro. But, Tillerson also said that he wants to find ways to mitigate the negative effect sanctions would have on U.S. oil companies, Venezuelans and other regional countries that rely on Venezuelan oil. “The situation is becoming quite dire in Venezuela, so one of the aspects of considering sanctioning oil is what effect would it have on the Venezuelan people and is it a step that might bring this to an end, to a more rapid end,” Tillerson said. “Not doing anything to bring this to an end is also asking the Venezuelan people to suffer for a much longer time.”
Oil bears have to be on guard as demand has over taken the daily global production levels. We will see another big drop in Cushing Oklahoma stocks yet again as the delivery point empties.
— Phil Flynn
The Price Futures Group’s mission is to provide traders and investors with industry-leading trading solutions, informative market analysis, and cutting-edge technologies which enable efficient decision-making. The Group is available answer marketing questions and meet your investment needs. Find the company online at www.pricegroup.com or call the Chicago office at (888) 264-5665.