Oil & Gas Prices - June 18

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

Oil & Gas Prices - June 18

Post by dan_s »

Opening Prices:
> WTI is down 70c to $70.34/Bbl, and Brent is down 73c to $72.35/Bbl.
> Natural gas is down 5.8c to $3.195/MMBtu.

AEGIS Notes
Crude oil

U.S. oil fell for a second day, dipping below $71/Bbl as the Federal Reserve’s plans for future interest-rate hikes soured views on commodities (Bloomberg)
The Fed signaled it would raise rates twice by the end of 2023, causing traders to cool on trades linked to hotter inflation
“The prospect of earlier interest-rate rises propelled the dollar higher and provided traders with an excuse to take profit,” said Stephen Brennock, an analyst at brokerage PVM Oil Associates
See U.S. Dollar Index here: https://www.marketwatch.com/investing/index/dxy

Oil companies evacuate the Gulf of Mexico ahead of a tropical storm (Reuters)
All workers were evacuated from Chevron’s Genesis facility, located about 150 miles off the coast of Louisiana. Non-essential workers were removed from the company’s Big Foot, Jack/St. Malo and Tahiti production platforms
Occidental Petroleum Corp said yesterday they were withdrawing staff
Rainfall of up to 12 inches in isolated areas could hit the Gulf Coast and the Southern Appalachians, the NWS said

Iranians will head to the polls Friday in a presidential election likely to see Ebrahim Raisi replace the more moderate Hassan Rouhani (Bloomberg)
In his campaign, Raisi supported the nuclear-deal diplomacy but downplayed the accord as a “marginal matter”
Iran has the potential to bring back 1.5-2 MMBbl/d if sanctions are lifted. The return to max Iranian oil exports isn’t expected until at least mid-2022, according to Energy Aspects

Natural Gas

The July ’21 Henry Hub contract is on track for a 10c weekly loss
Cooler forecast for the U.S. East has contributed to a weekly loss of four gas-weighted cooling degree days, to bring the June total to 271

U.S. dry gas exports to Mexico reached a record high of 7.89 Bcf on June 17
Most of the gains over the last year have come from West Texas exports.
So far in June, West Texas exports to Mexico are averaging 1,451 MMcf/d, up from an average of 756 MMcf/d in June ‘20
Gas exports to Mexico will likely tick up as warmer weather approaches, and more gas is needed for power. This could help strengthen Waha prices further

TETCO issued a revised schedule for an outage on its 30” pipeline system that implies that the pipeline will be able to flow an additional 200 – 400 MMcf/d from the Northeast to the U.S. Gulf Coast
The revision may pressure gas prices as we had attributed part of the run-up in prices over the last two weeks to the TETCO outage. More flows on the pipe would loosen the Southeast gas market, and prices at Henry Hub

The EIA reported a 16-Bcf build for the week ending June 11. Much lower than the 5-yr average of 89 Bcf because PG&E reclassified 51 Bcf from working gas to base load gas. Utilities can draw gas from the base load, but there is an extra charge to do so.
The build was slightly less than the 70-Bcf build analysts expected when taking into account the reclassification. The implied injection of 67 Bcf was on the bullish end of estimates
Total stocks now stand at 2.427 Tcf, which is 453 Bcf below last year and 126 Bcf below the 5-year average. < I expect the deficit to the 5-year average to grow through at least June because the next three weeks compare to 5-year average draws of 87, 61 and 65 Bcf.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - June 18

Post by dan_s »

This morning WTI tested the $70 support level and bounced higher, approaching $72 at the time of this post (10AM CT). The article below from Reuters seemed to be the catalyst. My take is that the two main FEARs, spikes in oil supply from the U.S. shale producers and Iran, are both overblown. Both the U.S. and Iran won't bring significantly more supply to market during 2H 2021 and by mid-2022 this world will need every drop of oil they can produce. OPEC+ will need to ramp up production in Q3 to avoid $100 oil this summer. OPEC+ is now in total control of the oil price and they like higher prices. American's are going to be paying a lot more for gasoline and they will start screaming at Team Biden to stop their war on the oil & gas industry. At least I hope so.
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LONDON (Reuters) - OPEC officials heard from industry experts that U.S. oil output growth will likely remain limited in 2021 despite rising prices, OPEC sources said, giving it more power to manage the market in the short term before a potentially strong rise in shale output in 2022.

Officials from OPEC's Economic Commission Board (ECB) and external presenters attended a meeting on Tuesday focused on U.S. output, the sources said. OPEC heard from more forecasters on the outlook for 2021 and 2022 at a separate meeting on Thursday.

While there was general agreement on limited U.S. supply growth this year, an industry source said for 2022 forecasts ranged from growth of 500,000 bpd to 1.3 million bpd.

"The general sentiment regarding shale was it will come back as prices go up but not super fast," said a source at one of the companies that provided forecasts to OPEC.

U.S. shale oil output usually responds rapidly to price signals and U.S. crude has this week hit its highest since October 2018 at nearly $73 a barrel. But U.S. producers are still focusing on capital discipline and investor returns, rather than expanding supply, the ECB heard.

"Investment discipline and free cash flow for the investor," said one OPEC+ source on condition of anonymity, summarising one of the ECB meeting's talking points. The ECB advises OPEC ministers and does not set policy.

Two sources said a presentation made to the meeting forecast U.S. output would rise by a low rate of 200,000 barrels per day this year. A third source said this level of growth was the consensus for this year among most presentations.

The lack of a large shale rebound could make it easier for OPEC and its allies, known as OPEC+, to manage the market. OPEC+ is gradually unwinding record output curbs made last year as demand recovers, and meets to decide policy on July 1.

"It looks like the shale oil genie is going to stay in the bottle for now," said the source at one of the companies that provided forecasts. "OPEC and Saudi Arabia have a lot of power at this time."

MORE SHALE IN 2022

At Thursday's technical meeting, OPEC+ considered forecasts from a range of organisations, including the International Energy Agency, Argus Media, the U.S. Energy Information Administration, Wood MacKenzie, IHS, Energy Intelligence and Energy Aspects, sources said.

One of the OPEC sources said the forecasts were not projections OPEC was adopting and a fourth OPEC source said, while it was clear that capital discipline remained a priority for U.S. producers, the production outlook was not clear.

OPEC itself has been forecasting a limited shale rebound this year, as have U.S. producers themselves.

The latest OPEC forecast is for U.S. crude production in 2021 to decline by 120,000 bpd to 11.2 million bpd, and for output of tight crude - another term for shale - to drop by 140,000 bpd to 7.15 million bpd.

The group keeps a close watch on the outlook for U.S. supply. OPEC producers were sent reeling by a 2014-2016 price slide and global glut caused partly by rising U.S. output. In 2014, U.S. production rose by 1.5 million bpd.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - June 18

Post by dan_s »

“Despite the global market deficit coming in line with our forecasts in recent months, we under-estimated the weight of such demand and Iran uncertainties, keeping prices trading below our $75 a barrel in the second quarter of 2021 (Q2-21) estimated fair value. With growing evidence of the demand rebound, and imminent clarification on the likelihood of an Iranian return, we now see a clearer path for the next leg higher in oil prices, with the sell-off offering opportunities to position for the rally to $80 a barrel” wrote Jeffrey Currie, global head of commodities research at Goldman Sachs in a recent co-authored note.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - June 18

Post by dan_s »

Closing Prices:
> WTI prompt month (JUL 21) was up $0.60 on the day, to settle at $71.64/Bbl.
> In contrast, NG prompt month (JUL 21) was down $0.038 on the day, to settle at $3.215/MMBtu.

A month ago, WTI was trading below $60/bbl.
Trading Economics: "WTI crude futures were trading around $72 a barrel on Friday, not far from an over two-year high of $73 per barrel hit on Wednesday, and recording its fourth consecutive week of gains. Investors were optimistic about an improved outlook for demand as the coronavirus vaccination campaign continues and economies reopen. On the supply side, OPEC+ recently agreed to keep to their plan to gradually ease supply curbs through July, signalling the ongoing strengthening of market fundamentals. Keeping a lid on prices was a stronger dollar, which acted as a headwind for dollar-denominated commodities."
Dan Steffens
Energy Prospectus Group
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