Oil & Gas Prices - May 23

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Oil & Gas Prices - May 23

Post by dan_s »

Opening Prices:
> WTI JUL22 contract opened up $0.17 to $110.45/bbl
> Natural gas JUN22 contract opened slightly lower, $0.004 at $8.079/MMBtu.

AEGIS Notes
Oil

Shanghai officials laid out the criteria they'll use to classify portions of the city as low risk for COVID as they try to end the lockdown on Sunday (BBG)
> China is increasing its purchases of Russian ESPO crude from the Far East, with some barrels potentially being stored onshore as the Covid-19 resurgence clouds the nation’s demand outlook
> Twenty of the 21 oil shipments loaded at the Far East oil port of Kozmino this month are headed for China, according to shipping analytics company Vortexa Ltd
> Meanwhile, Beijing reported a record number of new COVID cases, reviving concern that the capital may face a lockdown

At the World Economic Forum in Davos, IEA director Faith Birol urged oil companies to behave responsibly to regulate prices or risk a global recession
> Indian oil and gas minister shared his concerns, saying that several of his country's neighbors are in "grave dire straits" as a result of rising costs
> Meanwhile, German Economy Minister Habeck has called for reforms to the laws that control energy markets to lower costs and limit Russia's profit from energy exports

Natural Gas

Natural gas futures opened flat to the prior close this morning and the JUN22 contract is up 4 cents at the time of this post.
Further dated tenors, primarily Summer ’23 and Winter ‘23/’24 are still only slightly removed from their all-time highs but are fairly flat week-over-week
> Summer 22: -0.69%, at $8.007
> Winter 22/23: -0.45% at $7.829
> Summer 23: +2.05%, at $4.834
> Winter 23/24: +1.44% at $5.134

Weather forecasts warmed up for most of the country, with the total lower-48 pop-weighted temperature average (1-15 day range) rising 5.2°F. The 6-10 day range saw the most change, with the Northeast region warming by around 17.3°F and the Midwest warming by 8.1°F

Lower-48 dry gas production is steady at around 95.6 Bcf/d. Production is currently on track to rise 300 MMcf/d, thanks to increases in the South Central
> LNG feedgas demand is back above 13.2 Bcf/d, which is the highest in weeks, and only 700 MMcf/d removed from its all-time record on March 19
> U.S. LNG feedgas nominations have the potential to set new records as trains return from maintenance with flows to the newly commissioned Calcasieu Pass at around 1.175 Bcf/d
> FERC says LNG exports are a key factor in higher summer natural gas, electricity prices (NGI)

According to Federal Energy Regulatory Commission (FERC), demand growth will outpace supply gains this summer, leading to higher prices year-over-year
> The agency shows total domestic production is expected to increase 3.4 % year-over-year, while total consumption is expected to rise by 4.8 %
> The largest increase in demand is from LNG exports. Since last summer, U.S. LNG export capacity has increased by at least around 2 Bcf/d, with 0.6 Bcf/d from Train 6 at Sabine Pass, and another 1.3 Bcf/d from Calcasieu Pass

AEGIs notes that it has been our view that the lower-48 supply-demand balance will depend on the timing of both LNG export capacity growth and dry gas production. Well, as It happens, domestic production has struggled to ramp up, while LNG capacity has been brought online at a breakneck clip, which is why this market is so tight. < Unless we force utilities into lots of gas-to-coal fuel switching for power generation this summer, there is little chance of refilling U.S. natural gas storage before the next winter arrives. This morning coal is $417/ton, which means it is not economical to switch to coal for power generation unless ngas is over $12.00/MMBtu. FWIW I think Team Biden is clueless to how serious this could become. Maybe we just want to be "More like Europe".
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - May 23

Post by dan_s »

Closing Prices:
> Prompt-Month WTI (Jul 22) was down $-2.94 on the day, to settle at $110.29 < Note that July is now the "Front Month".
> Prompt-Month Henry Hub (Jun 22) was up $0.661 on the day, to settle at $8.744

I will open tomorrow's luncheon presentation with why I believe U.S. natural gas prices may be going a lot higher in Q3.
Dan Steffens
Energy Prospectus Group
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