Oil & Gas Prices - Nov 24

[dan_s]

Opening Prices (not what Team Biden was expecting)
> WTI is down 23c to $78.27/Bbl, and Brent is down 25c to $82.06/Bbl.
> Natural gas is up 3.4c to $5.001/MMBtu.

Reminder: All of my forecast/valuation models are based on WTI averaging $75/bbl in Q4 2021 and $80/bbl in full year 2022.

AEGIS Notes
Oil

Oil rallied Tuesday despite the announcement that crude consuming nations would be releasing oil from their strategic reserves
> WTI was already down nearly $10/Bbl leading up to yesterday's official announcement – pricing in the rumor of more crude on the market
> The total SPR release by the U.S., China, Japan, India, and South Korea was smaller than many analysts and traders expected (BBG)

EIA oil Inventories
Bloomberg Survey
U.S. crude oil inventories: -1,526 MBbl
U.S. gasoline inventories: -436 MBbl
U.S. distillate Inventory: 559 MBbl
U.S. refinery utilization: +0.48%

Brent at $82/Bbl is pricing in not only the release of the announced reserve but also a 1.5 MMBbl/d-hit to global demand over the next three months, Goldman Sachs said in a note dated Nov. 23 (Bloomberg)
> The aggregate 70-80 MMBbl reserves release from SPRs was smaller than the more than 100 MMBbl the market had been pricing in
> With the swap nature of most of those barrels, the net increase is even smaller; just 40 MMBbl in supplies over 2022-2023
> The 1.5 MMBbl/d demand hit is equivalent to pricing in a repeat of last winter’s 1 MMBbl/d hit to EU demand due to Covid-19

Natural Gas

Gas prices are trading mostly sideways this morning, near yesterday’s settle of $4.967
> According to Bloomberg, U.S. lower-48 dry gas production is around 97.7 Bcf/d (+4.8% W-o-W), while demand is up to 90.1 Bcf/d (14% W-o-W)
> LNG feedgas demand is still below its highs reached late last week at around 11.3 Bcf/d, while an onsite disruption at Freeport LNG persists
> The December 2021 gas-weighted heating degree day forecast total decreased by 7.8 overnight, to 806.3

The EIA is expected to report a 24-Bcf draw from US storage this morning at 11 am CT (Bloomberg)
> If confirmed, this would be the first weekly draw of the season
> If a 24-Bcf draw is reported, that will bring total inventory levels to 3.619 Tcf, in contrast with the five-year average of 3,681
> This would bring the deficit to the five-year average to 62 Bcf from 81 Bcf < Last winter began with storage more than 300 Bcf over the 5-year average and winter ended with storage below the 5-year average..
> According to Bloomberg’s survey, analyst estimates ranged from an 11-Bcf draw to a 29-Bcf draw, with 21.88 Bcf serving as the average