Biden to Take Immediate Action as President
January 20, 2021
Today is the last day to do a forward contract that will start in February. Tomorrow contracts will start in March and be offered out until February 2022.
The news around the market seems quiet this morning as it appears more focused on the inauguration. It has been reported that President-elect Biden will take 15 executive actions with the canceling of the Keystone XL pipeline permit and the return to the Paris Climate Accord two of the big one related to energy. He is also expected to rejoin the World Health Organization, stop the building of the border wall, and lift the travel bans against some predominately Muslim countries.
US equites rose due to better than expected earnings from some big US banks and comments from Janet Yellen, the US Treasury Secretary expected nominee. Yellen said congress should act big on the next coronavirus stimulus package claiming that the benefits outweigh the costs of the estimated $1.9 trillion in higher debt. The outlook for this stimulus package has been that it will juice the economy and energy traders have been optimistic that this will boost demand. Again, as I have said before the big question is, has this outlook already been baked into the market or not at this point.
The market also continues to be optimistic about rising China fuel demand after the world’s largest importer of oil reported data showing a 3% rise in 2020 of refinery output. This was a record high.
This from the IEA monthly report this week. Oil demand fell by 8.8 million bpd in 2020. However, global oil demand is expected to recover by 5.5 million bpd to 96.6 million bpd in 2021. Supply and demand are on track to recovery this year, and efforts by major producers to balance the market by reining in output are helping draw down oil stocks worldwide. Given the expected increase in second half of the year, however, “much more oil is likely to be required.” The IEA reported that OECD crude oil stocks in November fell by 23.6 million barrels to 3.108 trillion barrels, which was 167 million barrels above the five-year average. Global oil supply is expected to increase by more than 1 million bpd in 2021 after falling by 6.6 million bpd in 2020. The IEA also warned that the demand recovery will be delayed due to new spike in coronavirus cases before the full roll-out of vaccines and more stimulus measures later this year.
The US EIA said US oil output from seven major shale formations is expected to fall for the fourth consecutive month to about 7.52 million bpd in February, the lowest level since June.