Looking to the Futures
Crude Prices Climb as Geopolitical Risks Rise
Crude oil futures (/CLH26) ended the week higher after Russia seemed to downplay any hopes of a near-term settlement of the Ukraine/Russian conflict over territorial issues between the two nations.
In addition, in its Weekly Petroleum Status Report, the Energy Information Administration (EIA) said crude oil stockpiles rose by 3.6-million barrels during the week ending January 16. This was above expectations for a 1.1-million barrel storage build.
Oil inventories, excluding the Strategic Petroleum Reserve, stood at 426 million barrels, 2% below the five-year average.
U.S. oil production declined by 21,000 barrels per day last week and averaged 13.732 million barrels per day. This was 255,000 barrels per day higher than one year ago.
On the oil product side, distillate inventories increased by 3.2-barrels, which was contrary to expectations for a 200,000 barrel draw. Distillate inventories are now 1% below the five-year average for this time of year.
Gasoline inventories increased by 6-million barrels, which was above expectations for a 1.7-million barrel build. These stockpiles are now 5% above the five-year average.
EIA said gasoline production decreased from the previous week and averaged 8.8-million barrels per day. Distillate production also declined last week, averaging 5.1-million barrels per day.
The agency also reported that U.S. ethanol production declined last week, averaging 1.119 million barrels per day. Expectations were for a decline to 1.13 million barrels per day.
U.S. ethanol inventories increased to 25.7 million barrels last week. Traders were expecting inventories of 24.8 million barrels.
Digging further into the EIA report, refinery utilization fell by 2 percentage points to 93.3% last week. Expectations were for a decline to 94.5%. U.S. gasoline demand fell by 470,000 barrels per day to 7.834 million barrels per day. Distillate demand also declined last week, falling by 571,000 barrels per day to 3.524 million barrels per day.
Oil storage in Cushing, Oklahoma, the delivery point for the WTI Crude Oil futures (/CL) contract, increased by 1.5-million barrels last week to 25.1 million barrels.
The U.S. crude oil rig count increased by one and now total 410 rigs during the reporting period ending January 16. 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 lower in the early hours with the S&P 500® (–0.02%), the Nasdaq-100® (–0.11%), the Russell 2000® (–0.13%), and Dow Jones Industrial Average® (–0.01%) all in the red.
In Asia, major indexes closed mixed, with the Hang Seng (+0.06%) higher, but the Shanghai (–0.09%) and Nikkei (–1.79%) posting losses.
European trading saw the FTSE (+0.18%) move higher but the CAC (–0.21%) and the DAX (–0.09%) lower by midday.
Futures on the move
Natural gas futures (/NGH26) ended Friday’s trading session in the green (+0.87%) as traders expect natural gas demand to soar as a major winter storm brought heavy snow, sleet, and freezing rain across a wide area of the lower 48 states the past few days.
The National Weather Service Climate Prediction Center is forecasting near normal to above normal temperatures from January 29th to February 4th for areas west of the Great Plains. Below normal temperatures are expected in areas east of the Great Plains during this time period.
In addition, the U.S. Energy Information Administration (EIA) reported U.S. natural gas inventories declined by 120 billion cubic feet (Bcf) during the week ending January 16. This was above market expectations for a 106 Bcf draw. U.S. gas inventories are currently 6.1% above the 5-year average and 4.8% above last year.
Japanese yen futures (/6JH26) closed in the green on Friday (+1.62%) with the lead month March futures trading at two-week highs. Friday’s yen rally against the U.S. dollar appears due to speculation that the Bank of Japan was intervening in the FX market to help support the Japanese currency, which had fallen to 18-month lows against the greenback earlier this month.
Silver futures (/SIH26) traded at historic highs on Friday (+5.15%), with the lead month March contract surpassing the $100 per ounce level. Strong demand for industrial metals, weakness in the U.S. dollar, and geopolitical concerns have been among the major catalysts for the surge in silver prices over the past several months.
What else to watch today
Major economic reports, trading events, and news items that could potentially impact specific futures markets:
Durable Goods Orders for November (interest rates and stock indices)
Dallas Fed Manufacturing Index for January (interest rates)
Treasury auctions
3-and 6-month T-bills and 2-year notes
New Products
New futures products are available to trade with a futures-approved account on all thinkorswim platforms:
- Ripple (/XRP)
- Micro Ripple (/MXP)
- Micro Corn (/MZC)
- Micro Wheat (/MZW)
- Micro Soybean (/MZS)
- Micro Soybean Oil Futures (/MZL)
- Micro Soybean Meal Futures (/MZM)
- 1 OZ Gold (/1OZ)
- Solana (/SOL)
- Micro Solana (/MSL)
Visit the Schwab.com Futures Markets page to explore the wide variety of futures contracts available for trading through Charles Schwab Futures and Forex LLC.