Oil & Gas Prices - Feb 5

[dan_s]

Notes in " " are from Trading Economics early this morning with my comments in blue.

Crude Oil
"WTI crude futures steadied above $72 per barrel on Monday after sharp falls last week as investors continued to monitor developments in the Middle East. Last week, oil prices plunged more than 7% as progress in ceasefire negotiations between Israel and Hamas eased concerns about supply disruptions from the region. Fading expectations of immediate interest rate cuts from the US Federal Reserve and persistent concerns about China’s economic recovery also weighed on the global demand outlook. Meanwhile, the US said that it will conduct further military action against Iran-backed groups, raising tensions in the Middle East although insisting that it is not seeking a wider conflict in the region."

There is a lot of "noise" impacting the traders of oil futures. Paper Traders sometimes move to the sidelines when the noise level is this confusing. I'm most surprised by the fact that a shooting war between the U.S. and Iran's proxies is not adding a significant supply risk premium to the oil price.

From OilPrice.com
"According to one source who works closely with Iran’s Petroleum Ministry and another who works in the European’s Union’s energy security complex – both exclusively spoken to by OilPrice.com within the last month – as from 12 December 2023 to 18 January this year Iran was producing between 4.6-4.9 million barrels per day (bpd). This has subsequently dropped to an average of around 4.2-4.5 million bpd. This compares to official figures of 2.99 million bpd. Subtracting the oil used domestically and in the manufacture of other products, Iran has been exporting around 1.80-1.95 million bpd of crude during that period, and for several months before the figure was only slightly less." < Sales proceeds from these Iranian oil exports is what is funding Iran's proxy war with the U.S..

Natural Gas
"US natural gas futures are currently trading around $2.1/MMBtu, slightly above nine-month lows reached last week as investors assess demand and weather forecasts. Experts predict above-average temperatures until at least February 15, with a return to normal expected on February 16-17. Going further, heating demand is expected to rise with colder weather later this month. Meanwhile, gas production is increasing as more wells resume operations after the mid-January Arctic freeze. Also, gas flowing to the nation's LNG export facilities remains limited due to technical issues at Freeport LNG's export plant in Texas."
This is the first indication from our national weather service that Joe Bastardi's forecast of much colder weather coming to the eastern U.S. in mid-Feb may be accurate. Keep eye on the Chicago 10-day forecast. When highs for the day are below freezing in Chicago another significant shift back to winter weather will be confirmed.

[dan_s]

This morning it was announced that an Iran-backed militia group conducting a drone strike earlier today that hit a U.S. base in Syria, killing six Kurdish fighters working with the U.S.. Right now, the situation looks like it’s going to get worse before it gets better, which makes it a powder keg for crude prices. - Energy Investor Monday Morning Energy Brief

[dan_s]

Some Good News for the Gassers:

Trading Economics
"Propane prices at the Mont Belvieu distribution hub in Texas held near $0.9 per gallon, their highest level in almost 1-1/2 years amid continued decrease in supply. According to the latest EIA data, US propane inventories dropped to 62.6 million barrels on the week to January 26th, well below 73.2 million barrels in the same period year earlier and marking the lowest reading since the beginning of May 2023. On the other hand, the upward movement was limited by falling oil prices since progress in ceasefire negotiations in the Middle East eased concerns about shipments disruptions. Being a by-product of crude oil refining and natural gas processing, propane is intricately linked to the availability of the former."