More profit taking as we have a busy report week with Consumer Confidence at 9:00 a.m. Central and API Energy Stocks at 3:30 P.M. Janet Yellen’s last FOMC meeting today and a decision to raise rates or keep in check tomorrow. And we have President Trump’s State of the Union Speech tonight. In the overnight electronic session the March Corn is currently trading at 360 ¼ which is 1 ½ of a cent higher. The trading range has been 368 ¾ to 359. Ideally, although a stretch but with fund activity picking up we would like to test 369. With Argentina and Brazil’s harvest in question to higher percentages of crop being good to excellent could trigger some additional buying.
On the Ethanol front the March contract is currently trading at 1.390 which is .003 of a cent lower. The trading range has been 1.390 to 1.389 with 5 contracts traded and Open Interest at 1,852 contracts. The market is currently showing 1 bid @ 1.369 and 2 offers @ 1.392.
On the Crude Oil front the market is in profit taking mode as well. After Consumer Confidence and API data the tone could be set for another drive to the upside, the market will also have a keen interest in President Trump’s State of the Union speech and if the FED will raise rates or keep in check tomorrow. In the overnight electronic session the March Crude Oil is currently trading at 6501 which is 55 points lower. The trading range has been 6556 to 6467.
On the Natural Gas front the market is trading the cold weather forecast and the reports are calling for a warmup tomorrow only to go back in the deep freeze Thursday and onward into next week. With the February contract expiring yesterday we could see a weather squeeze in the March contract which is currently trading at 3.247 which is 8 cents higher. The trading range has been 3.259 to 3.170.
— Daniel Flynn
The Energy Report: Big oil is big again
The oil companies are making a big comeback even as oil prices see a correction, after one of the best January’s 5 years in oil. Petro China profits may have tripled and Exxon Mobil is investing big in America again. The doom and gloom in Big and Little oil is going away as a market led by capitalistic optimism is making oil great again. Even as oil is weak today, because of a small correction in the stock market and worries about President Trump’s speech and what the Fed might do as well as expectations of the first crude supply build this year, the optimism in the economy is building. In the big picture the outlook for crude prices are stellar as more oil bears are throwing in the towel and banks are raising their oil price forecasts. Welcome to the bull side of oil, we are happy to have you join us.
Bloomberg News reports that PetroChina Co. revenues may have tripled amid cost cutting and higher energy prices. Income for 2017 may have jumped by as much as 16 billion yuan ($2.5 billion), the state-run oil giant said in a filing to the Hong Kong stock exchange, citing Chinese accounting standards. That implies net income of as much as 23.9 billion yuan. Profit at the Beijing-based company will snap three years of declines after posting its worst-ever profit in 2016 as falling crude prices crushed profitability.
The Wall Street Journal reported Monday that Exxon Mobil Corp. plans to spend $50 billion to expand its business in the U.S. in the next five years, investments that were “enhanced” by the American tax overhaul. The Texas-based energy giant didn’t specify whether the investment plan represented an increase in spending as a result of the tax rewrite passed by Congress and signed into law by President Donald Trump late last year, or how much of the $50 billion was tied to prospects Exxon was considering before the tax changes. Exxon Chief Executive Darren Woods made the announcement in a blog post, adding that the company was still studying whether the tax overhaul made additional investment more economically viable. “We’re actively evaluating the impact of the lower tax rate on the economics of several other projects currently in the planning stages to further expand our facilities along the Gulf Coast,” Mr. Woods said in the post. He singled out drilling operations in West Texas and New Mexico as areas where Exxon will be investing billions to boost production. The company has been planning to step up its spending levels in that region for years.
JP Morgan is playing catchup to the Energy Report. According to reports, JP Morgan raised its Brent crude oil price forecast for 2018 to $70 a barrel, higher than Bank of America, Merrill Lynch and Goldman Sachs but now in line with the Energy Reports previous forecast. JP Morgan says that they see better-than-expected global economic growth boosting oil demand in the first half of 2018. I wonder where I have heard that before?
Where we differ, JP Morgan predicts that we will see a so-called flood of crude oil that will weigh on the market in the second half as drillers take advantage of higher prices. The Energy Report predicts that we will need that flood of crude to make up for major capital spending cut backs in recent years.
The Energy Information Administration defended their record on their crude oil production reports yesterday after much criticism by industry analysts and market players. This is what they said were their key take aways • Estimating crude oil production is a necessary element to assess weekly U.S. crude oil supply/demand balances• Collecting weekly crude oil production data from operators is not feasible • Estimating weekly national-level production volumes is complicated• Estimates are driven by EIA’s Short-Term Energy Outlook (STEO) model • Track record compared to EIA’s monthly production (survey-based) data is quite good. Good but not perfect. We still believe that EIA consistently overestimates shale output.
As for Retail Gas prices, AAA says that at $2.58, the national gas price is four cents more expensive on the week. Across the country, motorists in 47 states and Washington, D.C. have seen pump prices increase as much as 9 cents with the Great Lakes, Central, South and Southeastern states seeing the largest increases. The Energy Information Administration (EIA) reports an increase on the week in gasoline demand and inventories.
— Phil Flynn
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