Oil & Gas Prices - Sept 15

[dan_s]

Opening Prices:
> WTI is down $1.68 to $86.80/bbl, and Brent is down $1.76 to $92.34/bbl.
> Natural gas is down -57.7c to $8.537/MMBtu.

Remember, this is the "Year of the Roller Coaster" for commodity prices.

AEGIS Notes
Oil

Oil fell more than 1% on Thursday amid expectations of weaker demand and a strong U.S. dollar
The IEA forecast in its monthly report that the growth in oil demand will halt in 4Q22
The U.S. dollar held near recent highs, supported by expectations that the U.S. Federal Reserve will keep tightening policy

The Department of Energy said that no trigger price is included in its plan to replenish the country's emergency oil supply and that such deliveries are unlikely to start until after fiscal 2023 (BBG)
It was reported earlier this week that the Biden administration is considering refilling the Strategic Petroleum Reserve at $80/Bbl to safeguard U.S. oil production growth and prevent a sharp decline in crude prices
"Claims that we are currently considering buying oil once it dips below $80 a barrel are inaccurate," said DOE in a statement issued on Wednesday
However, administration officials say that discussions of oil repurchasing are preliminary and are weighing the timing of such a move

China may allow refiners to increase fuel exports as the nation aims to strengthen its economy following several COVID-19 lockdowns (BBG)
Many traders and refiners have already applied for an additional 15 million tons (3.063 MMBbl) of fuel export quotas, according to people familiar with the matter
If approved, the total amount of exports in 2022 will rise to 39 million tons (7.963 MMBbl) compared to 38.6 million tons (7.882 MMBbl) last year
A batch of 1.5 million tons (0.306 MMBbl) will be approved possibly this week, and the additional 15 million tons (3.063 MMBbl) might be approved by the end of the month
Meanwhile, today China plans to lift the lockdown in 17 Chengdu districts
Six districts are still facing strict travel restrictions
The city of 21 million people, which was mainly locked down at the beginning of the month, recorded just 29 new cases on Wednesday
Nevertheless, authorities have tightened Covid quarantine efforts in and around Beijing ahead of a meeting of top leaders. Certain areas close to Beijing have been locked down, virus testing regulations have been tightened, and domestic travel discouraged over the next month

Natural Gas

Natural gas prices are lower by 6% this morning
The EIA releases its weekly natural gas storage update today
The median analyst expectation is for an injection of 72 Bcf, the Bloomberg survey ranges from a low of 62 Bcf to a high of 80 Bcf
A 72 Bcf build would be 10 Bcf less than the five-year average injection
Following last week’s build of 54 Bcf, inventories are currently at 2,694 Bcf, a 349 Bcf deficit to the five-year average

Tentative labor deal reached, avoiding railway strike (Reuters)
A strike that would have shut down a significant amount of U.S. railways has been avoided following negotiations at the labor department
A rail shutdown could freeze almost 30% of U.S. cargo shipments
AEGIS notes that railways are the main transportation method for coal; a shutdown would significantly hamper the ability of the power sector to acquire the coal it needs
A shortage of coal would have forced power generators to burn a substantially larger amount of natural gas to make up for the shortfall
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MY TAKE: There is a lot of "noise" (Sanctions War with Russia, Covid Lockdowns in China, FEAR of a recession, Railroad workers strike, FEAR of what the Fed will do next, FEAR of what OPEC+ will do next, Iran nuke deal, U.S. dollar strength, etc.) impacting the oil price. Q3 actual oil and gas prices are going to be very close to what I've used in my forecast models. I believe that the significant shortages of space heating fuels (heating oil, natural gas and propane) will draw a lot more attention as winter approaches. The supply/demand fundamentals point to higher energy prices.

[dan_s]

Closing Prices:
> Prompt-Month WTI (Oct 22) was down $-3.38 on the day, to settle at $85.10
> Prompt-Month Henry Hub (Oct 22) was down $-0.790 on the day, to settle at $8.324

As winter approaches, the low inventories of space heating fuels will get a lot more attention.