DTN Thursday Energy Comments

Mary Kennedy
By  Mary Kennedy , DTN Basis Analyst
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February WTI crude oil futures closed down $1.78 at $75.21 while March closed down $1.73 at $74.88, with the front month breaking its seven-day winning streak to close out 2021. According to Dow Jones, the February NYMEX contract lost 2.3%, and for the year, the benchmark is up 55%, the largest one-year gain since 2009 and fourth yearly gain in the past six years. Data shows strong demand and falling inventories, along with production levels still below pre-pandemic levels. But the new COVID-19 wave still looms over demand, as airlines cancel many flights and inflation casts doubts about how the economy will perform next year.

DTN Refined Fuels reported the head of the World Health Organization, Tedros Adhanom Ghebreyesus said, during a conference in Geneva this week, that a "tsunami" of COVID-19 cases driven by the omicron variant would pressure hospital systems already on the "brink of collapse."

"I am highly concerned that omicron, being more transmissible, circulating at the same time as delta, is leading to a tsunami of cases," said the WHO Director-General on Tuesday. "This is and will continue to put immense pressure on exhausted health workers and health systems on the brink of collapse."

February RBOB closed down 6.68 cents at $2.2246 and March RBOB was down 6.35 cents at $2.2286, following crude oil lower even after a bullish midweek report by EIA that gasoline supplies fell by 1.5 million barrels (bbl) to 222.7 million bbl, about 6% below the five-year average. Trade expectations were that EIA would show a 200,000-bbl build

The Organization of the Petroleum Exporting Countries and its allies will meet on Jan. 4 to decide if they will continue to increase output in February. Midweek, DTN Refined Fuels noted the group is expected to raise output by 400,000 barrels per day (bpd) next month -- in line with its July agreement. At its last meeting held on Dec. 2, OPEC+ stuck to its plans to boost output for January despite the spread of the omicron variant and calls from Washington to release more supplies into the market amid surging gas prices. Russian Deputy Prime Minister Alexander Novak previously said OPEC+ wants to provide the market with clear guidance and not deviate from policy, which steers the group to gradually increase production. However, the rapid spread of omicron virus and renewed quarantine restrictions in some European countries and China could prompt the alliance to hit a pause on adding more supplies into the market.

Natural gas snaps a three-session losing streak to rise nearly 5% to $3.73/mmBtu, off recent highs as weather proves warmer than previously thought, noted Dow Jones. The front-month NYMEX contract recorded a 47% gain for the year, the largest since 2016, and is up for two consecutive years. Still, it ends the quarter with a 36% loss, the highest quarterly decline since 2008. "Weather remains the main driver of natural-gas prices, followed by concerns that COVID-19 could further curb economic activity," said Dow Jones.

Regional ethanol cash prices and RINs were not available Friday, but state prices were lower on average, but mixed on the day. The average daily ethanol price for 24 states reporting was $2.8379 per gallon, down 4.33 cents from Wednesday. The biggest drops were in Illinois down 40 cents, California down 20 cents and Kansas down 6.48 cents per gallon. A jump in prices was seen in North Carolina and Virginia up 12.62 cents.

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow her on Twitter @MaryCKenn

Mary Kennedy

Mary Kennedy
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