Oil & Gas Prices - Dec 1

[dan_s]

Opening Prices:
> WTI is up $1.64 to $82.19/bbl, and Brent is up $1.54 to $88.51/bbl.
> Natural gas is up 19.7c to $7.127/MMBtu.

AEGIS Notes
Oil

Oil extends gains on Thursday morning following several headlines
> WTI rose by $1.64 to trade above $82/Bbl
> China might be starting to soften its Covid-zero policy following protests over mobility curbs
> The nation adjusted Covid-19 rules in two major cities, Guangzhou and Zhengzhou, replacing broad lockdowns with more targeted limitations

The market awaits the EU’s decision on the Russian price cap (Dec 5) and the production decision from OPEC+ (Dec 4)
> OPEC and its allies are expected to hold production flat, according to WSJ
> EU nations are mulling a price-cap level of $60/Bbl on Russian crude (BBG)
> The talks are still ongoing, and all members of both G7 and EU groups need to agree for the cap to go into effect
> The price level needs to be attractive to Kremlin for it to work and secure the flows

Russian Foreign Minister Lavrov reiterated that Russia wouldn’t sell oil to those who participate in the price-cap mechanism (BBG)
> Lavrov stated in an online briefing that Russia would deal with its partners "directly" and doesn't care what level is decided for the price cap on its crude
He added, “Whenever we negotiate with China, India, Turkey, and other major buyers, there is always an element of balance of interests,” including on prices, “but that should be decided on mutual basis between a producer and a consumer”
> Additionally, Russia's crude output increased to an eight-month high of 10.9 MMBbl/d (Up 1.4% from October) ahead of sanctions taking effect on December 5, according to BBG calculations
> Calculations also indicated that domestic refineries in the nation processed crude at a rate of 5.8 MMBbl/d, an increase of 2.7%

White House is considering further oil and fuel releases this winter (CNBC)
> According to four unidentified sources cited by CNBC, the Biden administration may release additional volumes of crude oil and heating oil this winter in case of a supply shortage
> The US has 1 MMBbl of heating oil in storage. The White House might ask Congress to double that limit and build new storage facilities, according to CNBC

US crude inventories fell by 12.6 MMBbl last week, even more than expected, representing the biggest decline since June 2019, according to EIA data
< Despite the draws from the SPR.
The draw coincided with US exports of crude and refined products rising to a record of nearly 11.8 MMBbl/d

Natural Gas

Natural gas prices are up 3% this morning to $7.15
> The Summer ’23 strip is up 10c to $5.38, and the Winter ‘23/’24 strip is higher by 8c to $5.83

The EIA will release its weekly natural gas storage report today
> According to the Bloomberg survey, the median expectation is for a withdrawal of 82 Bcf, slightly larger than last week’s 80 Bcf withdrawal
> The five-year average withdrawal for this time of year is 32 Bcf, which could put this week's withdrawal on the more bullish side

Expansion of NGTL pipeline system approved by Canada (Reuters)
> On Wednesday, TC Energy’s planned expansion of its West Canada pipeline system was approved
> The expansion will add an additional 25 miles to the pipeline, with construction expected to be completed by November 2023
> An expansion of Canadian gas infrastructure would enable more gas to be imported into the United States and ease regional constraints

Congress passes bill to avoid rail strike before December 9 deadline (NYT)
> The bill would force companies and rail unions to accept an agreement that would give rail workers an additional seven days of paid leave
> The bill must still be passed by the Senate, where it could face more opposition than in the House
> If a rail strike were to occur, it would significantly limit the amount of coal that could be delivered to power plants, greatly increasing the demand for natural gas

[dan_s]

There is lots of noise keeping the oil paper traders away from going long on oil futures despite the fact that we clear have an extremely tight global oil market. If OPEC+ does not raise their production quotas next week, I expect WTI to drift higher. U.S. and all OECD petroleum inventories are on decline and already way below where they should be this time of year. A few shipments of heavy oil from Venezuela is not going to fix this manmade energy crisis.

Trading Economic:
WTI crude futures gave up most gains to trade little changed around $81 a barrel on Thursday, after jumping as much as 3.2% to $83.1 early in the session, as investors weigh prospects of a recovery in demand and further supply cuts from OPEC+. Investors await an OPEC+ meeting on December 4th amid recent speculation of more production cuts, despite little likelihood of a policy change, Reuters reported citing a source with direct knowledge of the matter. In November, the cartel curbed supplies by just over 1 million barrels a day, the most since 2020, according to Bloomberg. Traders also await any developments on an agreement for a cap for Russian oil, with EU governments tentatively setting a $60 a barrel price cap, although it still needs to be agreed by unanimity. Meanwhile, China has signaled a softening stance in the fight against the coronavirus, sparking hopes that the world's top crude importer could be swifter reopening its economy while offering an upbeat outlook for oil.

[dan_s]

Closing Prices:
> Prompt-Month WTI (Jan 23) was up $0.67 on the day, to settle at $81.22
> Prompt-Month Henry Hub (Jan 23) was down $-0.192 on the day, to settle at $6.738