We’ll stay home for Christmas, Democrats agree, Covid grows, more stores will close, no presents under the tree. Transgressors, they will find you. So says the new regime. See family at Christmas but only in your dreams.
Ok, it might be too early for my Christmas songs parody yet again; oil prices take a hit on covid fears. Shutdown calls in places like Illinois and New York and other places threaten Thanksgiving, but some are saying it could go on through Christmas. Oh, sure, a surprise increase in crude oil supply did not help, but product draws, and low refinery runs send mixed signals about future demand. Yet leaders like Chicago Mayor Lori Lightfoot are ready to crack down on Covid gatherings. She fears that we could see 1000 more Chicagoans die by the end of the year. She wants us to stay home on Thanksgiving to avoid a super-spreader event, and if JP Morgan is right, Covid could cause Mayor Lightfoot to cancel Christmas.
In fact, if you want to have a real Christmas with your family, book cheap airfares to Europe. Market watch reports that, “As the U.S. struggles with record levels of cases and hospitalizations in a resurgence of the deadly coronavirus, in the old world of Europe, countries have been fending off round two of COVID-19 for weeks. According to David Mackie, an economist at JPMorgan, the lockdowns and restrictions imposed in the U.K., Germany, Italy, and elsewhere will likely allow those economies to reopen in time for Christmas. The bank judges that those timetables, for example, map out the U.K.’s second wave-lockdown ending by December 2 and Germany’s by November 30 are likely being observed. That said, more modest restrictions could linger after the expirations, and countries such as Spain are waiting to see if a lockdown will be needed after current curbs expire.
Of course wearing a mask on a long trip to Europe might be a challenge for grandma. Yet Covid demand fears overshadowed OPEC signals that they are possibly going to extend production cuts for three to nine months and try to work out an additional amount. Some OPEC members’ resistance to that is fear because they fear losing market share to U.S. shale producers. Well, based on the Energy Information Administration report, they should have little to worry about. U.S. production is still at 10.5 million barrels a day, and while we will see some improvement, it will take years for U.S. pricers to get back to their 13 million barrel a day peak.
U.S. refinery runs are still weak, partly due to storms, bad margins, seasonal maintenance is just a few of the reasons. Yet tightened product supply should improve margins. The seasonal lows should be in, but Covid is negative. Still, we think you should start hedging for a potential price spike this winter. Natural gas is included in that call.
EIA highlights: Natural gas in storage was 3,919 Bcf as of Friday, October 30, 2020, according to EIA estimates. This represents a net decrease of 36 Bcf from the previous week. Stocks were 200 Bcf higher than last year at this time and 201 Bcf above the five-year average of 3,718 Bcf. At 3,919 Bcf, total working gas is within the five-year historical range. For Petro, U.S. crude oil refinery inputs averaged 13.4 million barrels per day during which was 105,000 barrels per day less than the previous week’s average.
Refineries operated at 74.5% of their operable capacity last week. Gasoline production increased last week, averaging 9.3 million barrels per day. Distillate fuel production decreased last week, averaging 4.2 million barrels per day. U.S. crude oil imports averaged 5.5 million barrels per day last week, up by 470,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 5.3 million barrels per day, 12.6% less than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 450,000 barrels per day, and distillate fuel imports averaged 131,000 barrels per day. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.3 million barrels from the previous week. At 488.7 million barrels, U.S. crude oil inventories are about 6% above the five year average for this time of year. Total motor gasoline inventories decreased by 2.3 million barrels last week and are about 3% above the five year average for this time of year. Finished gasoline and blending components inventories both decreased last week. Distillate fuel inventories decreased by 5.4 million barrels last week and are about 15% above the five year average for this time of year. Propane/propylene inventories decreased by 0.9 million barrels last week and are about 7% above the five year average for this time of year. Total commercial petroleum inventories decreased by 11.5 million barrels last week. Total products supplied over the last four-week period averaged 19.1 million barrels a day, down by 10.7% from the same period last year. Over the past four weeks, motor gasoline product  supplied averaged 8.5 million barrels a day, down by 10.3% from the same period last year. Distillate fuel product supplied averaged 3.9 million barrels a day over the past four weeks, down by 8.9% from the same period last year. Jet fuel product supplied was down 43.5% compared with the same four-week period last year.
Phil Flynn
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