The Phil Flynn Energy Report
Global markets are selling off as the Covid-19 virus appears to be mutating into a more contagious strain. The UK is putting in lockdown orders, which is overshadowing the good news we heard out of Washington regarding the avoidance of shutting down the government and a Covid-19 relief package. Lockdowns will lower demand expectations for oil as travel and leisure stocks are getting rocked.
Fox News reported the following regarding the situation in the UK:
"U.K. Prime Minister Boris Johnson on Saturday imposed a new round of restrictions for London and much of southern England after officials said they have identified a new COVID-19 strain that can spread more quickly and is believed to be linked to a rise in infections across those areas. Johnson said that the capital and other areas in southern England currently under Tier 3 — the highest level of coronavirus restrictions — will move to an even stricter new Tier 4 that requires non-essential shops, hairdressers, and indoor leisure venues to close after the end of business hours Saturday.
The announcement comes a day after the country reported more than 28,500 new COVID-19 cases, with nearly 500 deaths. The latest official figures showed infections climbing across the U.K., with a sharp increase in London. The percentage of people testing positive over the past week rose in England, Wales, Scotland, and Northern Ireland, according to data released Friday by the Office of National Statistics.
Mike Ryan, chief of the World Health Organization’s emergency program, said Monday that the WHO was aware of a genetic variant of COVID-19 reported in about 1,000 individuals in England. ‘Authorities in the U.K. are looking at its significance. We have seen many variants — this virus evolves and changes over time,’ he said.”
In the U.S., the Wall Street Journal also reported that “Lawmakers reached a final agreement on the roughly $900 billion coronavirus relief package, moving Congress closer to the approval of a fresh infusion of aid to households, small businesses and schools after months of gridlock. The emerging agreement is expected to provide a $600 direct check to many Americans, $300 a week in enhanced federal unemployment benefits, and aid for schools, vaccine distribution, and small businesses. Negotiators are finalizing details for the rest of the bill after settling a disagreement on the Federal Reserve’s emergency lending powers earlier in the weekend. Senate Majority Leader Mitch McConnell said “all outstanding issues were settled.”
For oil, the fear of demand destruction could be overplayed, but it’s too soon to tell. The key for oil may be the close to see if it can rebound off of the overnight lows. Stay tuned.
Natural gas is flipflopping on outside market pressure. Andrew Weissman of EBW Analytics says that natural gas appeared to establish a solid floor last week — the January contract, which had repeatedly tested support near $2.38 per million British thermal units (MMBtu) the previous week, has been consistently trading above $2.60 and Henry Hub averaging $2.685 on Friday despite mild weekend weather. The ability to post further gains depends heavily on day-to-day swings in weather modeling runs. Sunday’s mid-day runs were bullish, but could reverse at any time. However, with monster draws likely to begin soon, further model heating degree day (HDD) gains could drive futures significantly higher.
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