Looking to the Futures
Geopolitical Risk in the Middle East Supporting Crude Prices
Crude oil futures ended Wednesday higher, as energy traders see no easing of U.S./Iranian geopolitical tensions.
In addition, in its Weekly Petroleum Status Report, the Energy Information Administration (EIA) said crude oil stockpiles increased by 8.5-million barrels during the week ending February 6. This was well above expectations for an 800,000 barrel storage build.
Oil inventories, excluding the Strategic Petroleum Reserve, stood at 428.8 million barrels, 3% below the five-year average.
U.S. oil production increased by 498,000 barrels per day last week and averaged 13.713 million barrels per day. This was 219,000 barrels per day higher than one year ago.
On the oil product side, distillate inventories decreased by 2.7-million barrels, which was above expectations for a 1.3-million barrel draw. Distillate inventories are now 4% below the five-year average for this time of year.
Gasoline inventories increased by 1.2-million barrels, which was contrary to expectations for a 400,000 barrel draw. These stockpiles are now 4% above the five-year average.
EIA said gasoline production increased from the previous week and averaged 9.1-million barrels per day. Distillate production also increased last week, averaging 4.9-million barrels per day.
The agency also reported that U.S. ethanol production rose last week, averaging 1.11-million barrels per day. Expectations were for an increase to 1.02-million barrels per day.
U.S. ethanol inventories rose slightly to 25.2 million barrels last week. Traders were expecting inventories of 25.4 million barrels.
Digging further into the EIA report, refinery utilization fell by 1.1 percentage points to 89.4% last week. Expectations were for a decline to 89.8%. U.S. gasoline demand rose by 147,000 barrels per day to 8.3 million barrels per day. Distillate demand also rose last week, increasing by 138,000 barrels per day to 4.449 million barrels per day.
Oil storage in Cushing, Oklahoma, the delivery point for the WTI Crude Oil futures (/CL) contract, increased by 1.1-million barrels last week to 25.1-million barrels.
The U.S. crude oil rig count rose by one to 412 rigs during the reporting period ending February 6. That is down 14.2% from a year ago according to energy services firm Baker Hughes’ North American Rotary Rig Count report.
This morning, U.S. stock index futures moved higher in the early hours with the S&P 500® (+0.30%), the Nasdaq-100® (+0.26%), the Russell 2000® (+0.56%), and Dow Jones Industrial Average® (+0.30%) all in the green.
In Asia, major indexes closed mixed, with the Shanghai (+0.05%) higher, but the Nikkei (–0.02%) and Hang Seng (–0.86%) posting losses.
European trading saw the DAX (+1.38%), the CAC (+0.83%), and the FTSE (+0.17%) markets move higher by midday.
Futures on the move
Natural gas futures (/NGH26) ended Wednesday’s trading session in the green (+1.41%) as traders covered short positions ahead of the release of U.S. natural gas storage data today.
The National Weather Service Climate Prediction Center is forecasting near normal to above normal temperatures from February 18th to February 24th for most of the lower 48 states with the exception of the far north and west portions of the country, where below normal temperatures are expected during this time period.
In addition, the U.S. Energy Information Administration (EIA) will report U.S. natural gas inventories for the week ending February 6 this morning. Expectations are for a 256 billion cubic foot (Bcf) draw. U.S. gas inventories are currently –1.1% below the 5-year average and 1.7% above last year.
10-year Treasury futures (/ZNH26) closed lower on Wednesday (–0.21%), despite trading at one-month highs earlier in the trading session. Yields rose following the release of the Non-farm Payrolls report for January. According to the U.S. Bureau of Labor Statistics, employment rose by 130,000 jobs last month, which was well above pre-report estimates for an increase of 70,000. The unemployment rate fell by 0.1% to 4.3% in January.
Gold futures (/GCJ26) saw prices continue to recover on Wednesday (+1.34%), as the recent steep drop in precious metals prices earlier this month appears to have drawn in buyers who were waiting for a price correction to initiate or add to existing long positions in Gold. In addition, gold’s strong price performance on Wednesday, despite a stronger than expected U.S. employment report for January, may spur additional momentum buying as gold prices remain resilient in the face of what appeared to be a bearish headwind for metals prices.
What else to watch today
Major economic reports, trading events, and news items that could potentially impact specific futures markets:
Jobless Claims Week of February 7 (stock index and interest rates)
Existing Home Sales for January (interest rates)
EIA Natural Gas Inventories for week of Feb 6 (Natural Gas)
Federal Reserve Balance Sheet as of Feb 11 (interest rates)
Treasury auctions
4-and 8-week T-bills and 30-year Bonds
Federal Reserve speakers
Federal Reserve Governor Stephen Miran is expected to speak today.
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