Oil & Gas Prices - Oct 4

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dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Oil & Gas Prices - Oct 4

Post by dan_s »

We have a live webinar today at 11:00AM CT.
You can register to attend on the EPG home page or send an email to energyprospectus@gmail.com asking for the registration link.

Opening Prices:
> WTI is up $1.56 to $85.19/bbl, and Brent is up $1.81 to $90.67/bbl.
> Natural gas is down -2.6c to $6.444/MMBtu. < HH gas joined the party after the markets opened. At the time of this post, it is up $0.20 at $6.67

AEGIS Notes
Oil

Oil rallies for a second day on hopes that OPEC+ will deliver a significant production cut
> The market's focus remains on OPEC+'s decision at their meeting tomorrow, as the cartel is already having trouble reaching its production quotas
> Yesterday, WTI rose by more than 5% after some OPEC delegates said that OPEC+ is considering reducing production by more than 1 MMBbl/d
> A weaker dollar and looming sanctions on Russian exports are also supporting prices

Saudi Aramco, the world's largest oil company, warned that global oil spare capacity is extremely low and that there won't be any left if China ends its Covid zero plan (BBG) < As I have been telling EPG members in my weekly podcasts for several months.
> “This is where we are heading. If China opens up a little bit, you will find out that spare capacity will be eroded completely,” said Aramco’s CEO Amin Nasser at a conference on Tuesday
> Only 1.5 to 2.0 MMBbl/d of capacity, according to analysts, could be quickly brought online in case of a supply disruption
> That amounts to just under 2% of the global market < When spare capacity got this low in late 2007, the price of WTI spiked to over $147/bbl.
> Additionally, if the anticipated production cut by OPEC+ materializes, there could be an increase in spare capacity, which might put downward pressure on longer-term prices

U.S. Treasury official Ben Harris gave out details for G7 nations' phased oil sanctions at a summit in Geneva today (BBG, Reuters)
> According to Harris, the G7 sanctions will be implemented in three phases, with the first phase focusing on crude oil, the second on diesel, and the third on lower-value products like naphtha < This is suicide for Europe, putting up to 50% of Europeans into "Energy Poverty".
> Beginning on December 5, the G7 and the EU will impose sanctions which include a two-phase ban on Russian crude and products
> The G7 could be in an odd position of attempting to ensure Russian production, despite worries that the sanctions might boost oil prices even further if Russia chose to cut its exports
> "As long as we preserve the flow of Russian oil, we consider this a win," Harris said. "The price cap can be considered a release valve on the (EU) sanctions package," he added. "It transforms the ban from an absolute ban to a conditional ban."

Natural Gas

Prompt-month gas prices are down slightly this morning after yesterday’s 5% sell off
> The Winter ‘22/’23 strip settled at $6.56, a new multi-month low
> Yesterday the Summer ’23 strip fell 7 cents, while the Winter ‘23/’24 strip declined by 8 cents

White House rules out natural gas export ban (Reuters)
> There has been discussion of banning gas exports to keep prices low and support domestic consumers, however, the white house has ruled out any export ban < It would destroy Europe.
> In March, President Biden committed to supporting Europe with LNG exports following the Russian invasion of Ukraine
> The analysis determined an export ban would be too extreme and would damage relationships with European allies

Solar power is now 33% cheaper than gas power (BBG)
> According to Guggenheim, utility-scale solar is now almost a third cheaper than electricity generated from natural gas, onshore wind is 44% cheaper
> Tax credit extensions and new U.S. climate regulations have reduced the cost of renewables, while gas prices have rallied to their highest level in over a decade
> Guggenheim said, “Solar and wind now present a deflationary opportunity for electric supply costs"
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - Oct 4

Post by dan_s »

From OilPrice.com this morning

Following several weeks of macro-driven weakness, this week has finally brought something more tangible evidence of tightness to oil markets. Namely, a substantial OPEC+ market intervention. Reports put the potential cut in OPEC+ production targets at around the 1 million bpd mark. This potential reduction in OPEC+ production will combine with Russian sanctions kicking in and the US SPR release running its course to add real upward pressure to oil prices. < Let me remind all of you that OPEC+ is just reducing their official production quotas. Actual production from the cartel has been and will remain below their quotas (~3 million bpd below quotas in August).

OPEC+ Is Serious About a Huge Cut. Meeting in person for the first time since March 2020, the OPEC+ meeting in Vienna this week is expected to see the largest coordinated downward revision in years as the oil group is reportedly considering a 1 million b/d cut for November 2022.

White House Restarts the Fuel Price Blame Game. The Biden Administration has stirred up emotions in the oil industry again after Energy Secretary Jennifer Granholm blamed majors for their failure to maintain sufficient fuel inventories, increasing the odds of regulatory caps on fuel exports out of the US. < This administration is clueless. IMO Team Biden is doing this to shift blame for the global energy crisis away from their policies that have created it.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - Oct 4

Post by dan_s »

Closing Prices:
> Prompt-Month WTI (Nov 22) was up $2.89 on the day, to settle at $86.52
> Prompt-Month Henry Hub (Nov 22) was up $0.367 on the day, to settle at $6.837

All eyes and ears will be on the OPEC+ "production cut" tomorrow morning, which is really just a "quota cut".

Hang tough on your gassers. HH ngas prices will spike with the first real cold waves. Miss La Nina is coming soon.
Dan Steffens
Energy Prospectus Group
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