Opening Prices:
> WTI is up $2.92 to $23.31/Bbl, and Brent is up $2.69 to $29.89/Bbl.
> Natural gas is up 12.1c to $2.114/MMBtu
Closing Prices:
>WTI prompt month (JUN 20) was up $4.17 on the day, to settle at $24.56/Bbl. < WTI now over $25 in after-hours trading. Today was a big short cover rally.
>NG prompt month (JUN 20) was up $0.141 on the day, to settle at $2.134/MMBtu < Looks like we have a shot at $2.50 ngas by early July and $3.00 by Thanksgiving. If Raymond James forecast that ngas will go to $4.00 in 2021 you definitely want to add some "gassers" while they are "on sale".
As I've told you in my last two podcasts, the crude oil storage problem will be resolved by mid-May. It is happening earlier. I now expect shut-ins to take U.S. oil production down 2.5 to 3.0 million barrels per day to approximately 10 million BOPD. U.S. oil production peaked in November at over 12.8 million BOPD. A return to that level isn't happening until WTI is over $60/bbl.
Energy Report: The Comeback
By Phil FlynnMay 05, 2020 08:58AM ET
Everybody loves a comeback, and Oil is rallying for the 5th day in a row on comeback hopes. Oil prices are shaking off fears of oil storage overflowing. Genscape reported an increase in inventories of 1.8 million barrels at Cushing, Oklahoma, the delivery point for West Texas Intermediate crude. That would be the smallest weekly gain since mid-March if confirmed by official data due Wednesday, according to Bloomberg News. The market is also pricing the oil demand comeback as cities in Europe, Africa, and some states in the U.S. begin to reopen.
U.S. production may have its biggest retraction in history. Reuters reported earlier that Exxon Mobil Corp (NYSE:XOM) and Chevron Corp (NYSE:CVX) are slamming the brakes on oil output, as the top two U.S. producers plan for combined global shut-ins of 800,000 barrels per day in response to plunging crude prices and fuel demand. And that is just the big guys. The Investor Business Daily reports that Permian Basin shale giant Concho Resources (NYSE:CXO) said last week it plans to slash its 2020 capital budget further to $1.6 billion, representing a 40% decrease from its initial view. Continental Resources (NYSE:CLR) reportedly stopped nearly all drilling in the Bakken shale formation.
Reuters reports that Resource Energy turned attention to the Bakken shale region in North Dakota, where the company, a relatively small producer, operates. Costs of extracting are some of the highest in the United States. So are the costs of transporting due to limited storage and the distance to refineries and consuming centers. Oil producers in the Bakken, which sprawls across North Dakota and eastern Montana, on average break even at $46.54 a barrel, according to an analysis by Deutsche Bank (DE:DBKGn). That is well above the around $40 a barrel in the Permian basin, the largest U.S. shale field. Bakken crude BAK- fetched $3.40 a barrel on April 21. It has since recovered to about $14, still below the cost of producing.
The team at Resource Energy realized they would need to consider shutting down the remaining 20 percent of output still operating in the Bakken shale region, Kent said. North Dakota, second only to Texas in oil output among U.S. states, was taking a big hit. In just one day in late April, some 60,000 bpd were shut in the country. Production has dropped by at least 400,000 bpd since March 1, nearly a third of the state’s around 1.4 million bpd output before the crisis. State officials expect the volume shut in to rise further.
Texas: Reuters also reported that last month State Railroad Commissioner Ryan Sutton urged the first mandated cuts in 50 years. He promoted the idea on Twitter and TV, calling on his fellow commissioners to consider curbing 1.0 million barrels per day and winning audiences from OPEC Secretary-General Mohammad Barkindo and Russian Energy Minister Alexander Novak. But Sitton scrapped the plan a day before his commission, which regulates oil and gas in the state, was to vote on the proposal. Small and large companies, including Chevron, Exxon Mobil, and Occidental Petroleum (NYSE:OXY), were already planning to cut hundreds of thousands of barrels per day of shale, well ahead of any state action. “This is dead,” Sitton told Reuters in an interview. “What we should have done six weeks ago now would no longer have the right impact. We lack the leadership between the three commissioners to get that done.”
Texas is the largest U.S. oil-producing state, pumping about 5.4 million barrels per day (bpd) of crude. Last year its output rose by 600,000 bpd, to about 41% of the nation’s total. The pullback in shale output may bring back, "hurricane premium back into the natural gas market. Before the shale revolution, the US was dependent on the Gulf Of Mexico for as much as 25% of its domestic natural gas production. So when production shut down for a tropical storm, natural gas prices would spike. In recent years with more protection on land, the hurricane threat-focused less production losses and more on-demand destruction.
Optimism in the oil market is raising confidence in stocks. Still, we know that this price recovery is being delivered with a lot of pain by those in the oil industry. The trade will focus on the American Petroleum Institute report tonight. Keep an eye on the Cushing, OK number. If it comes out similar to what the private forecasters are predicting we could see this rally continue.
Oil & Gas Prices - May 5
Oil & Gas Prices - May 5
Last edited by dan_s on Tue May 05, 2020 4:29 pm, edited 1 time in total.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - May 5
Reuters: Oil outlook for this year and next turning brighter
UBS expects a pick-up in oil demand as virus-hit economies relax lockdowns and travel restrictions ease this month, with production to be subdued on the backdrop of current low prices and aggressive capital spending cuts by oil and gas producers. "We therefore expect the oil market to be balanced in third quarter and undersupplied in fourth quarter, and Brent to recover to $43 per barrel by end-2020 and to $55 per barrel by mid-2021," UBS analysts wrote in a note on Tuesday.
https://energy.economictimes.indiatimes ... s/75551311
As weather heats up, new cases of COVID-19 will drop like a rock. ALL corona viruses, including the common cold, pretty much die out when summer weather arrives. They die in seconds when exposed to sunlight.
Let's take a look at Mexico, the 10th highest population in the world and no real winter weather.
> With ~126,000,000 people and very high population density in Mexico City
> They've reported 24,905 COVID-19 cases (less than 0.02% of the population)
> They've reported 2,271 deaths (less than 0.002% of the population) and more than half were over 75 with other health problems
I just check ten countries in Europe and they are all reporting a steady decline in new cases of COVID-19.
Check for yourself here: https://gisanddata.maps.arcgis.com/apps ... 7b48e9ecf6
Increase in gasoline demand soon: We live in Sugar Land, Texas and there are many younger people with grade school age kids in the neighborhood. The five families closest to us are all planning driving vacations in June or July. A few of the moms are ready to sell their children. Apparently "home schooling" is not for everyone.
With any luck the cable news networks will move on to another "Click Bait" and the FEAR level will decline.
From the article above:
"UBS said its end-of-quarter price forecasts for Brent are $32 per barrel for 3Q20 and $43, $50 and $55 a barrel for the following three quarters. The bank's bullish view on oil comes after Goldman Sachs also raised its oil price forecasts."
UBS expects a pick-up in oil demand as virus-hit economies relax lockdowns and travel restrictions ease this month, with production to be subdued on the backdrop of current low prices and aggressive capital spending cuts by oil and gas producers. "We therefore expect the oil market to be balanced in third quarter and undersupplied in fourth quarter, and Brent to recover to $43 per barrel by end-2020 and to $55 per barrel by mid-2021," UBS analysts wrote in a note on Tuesday.
https://energy.economictimes.indiatimes ... s/75551311
As weather heats up, new cases of COVID-19 will drop like a rock. ALL corona viruses, including the common cold, pretty much die out when summer weather arrives. They die in seconds when exposed to sunlight.
Let's take a look at Mexico, the 10th highest population in the world and no real winter weather.
> With ~126,000,000 people and very high population density in Mexico City
> They've reported 24,905 COVID-19 cases (less than 0.02% of the population)
> They've reported 2,271 deaths (less than 0.002% of the population) and more than half were over 75 with other health problems
I just check ten countries in Europe and they are all reporting a steady decline in new cases of COVID-19.
Check for yourself here: https://gisanddata.maps.arcgis.com/apps ... 7b48e9ecf6
Increase in gasoline demand soon: We live in Sugar Land, Texas and there are many younger people with grade school age kids in the neighborhood. The five families closest to us are all planning driving vacations in June or July. A few of the moms are ready to sell their children. Apparently "home schooling" is not for everyone.
With any luck the cable news networks will move on to another "Click Bait" and the FEAR level will decline.
From the article above:
"UBS said its end-of-quarter price forecasts for Brent are $32 per barrel for 3Q20 and $43, $50 and $55 a barrel for the following three quarters. The bank's bullish view on oil comes after Goldman Sachs also raised its oil price forecasts."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - May 5
OilPrice.com: Tuesday May 5, 2020
Oil prices shot up on Tuesday on signs of rebounding demand and supply shut ins. President Donald Trump was notably excited by the news, tweeting the demand was returning. But it may not only be demand that is driving oil prices higher. DNB analyst Helge Andre Martinsen highlighted that “We are currently seeing accelerating oil-production curtailments outside the OPEC+ countries,”. He went on to suggest that the supply side of global oil markets “is about to change quite quickly.” < If WTI goes to $40/bbl tomorrow we might see the rate of decline in oil supply slow down, BUT OIL SUPPLY WILL KEEP FALLING UNTIL WTI IS WELL ABOVE $50/BBL. Upstream companies are not going to run out an ramp up drilling programs until they are sure oil prices will stay high.
Bakken output down 400,000 bpd. Roughly a third of North Dakota’s oil production has been shut in so far, down 400,000 bpd since March. The Bakken has some of the highest costs out of all U.S. shale, with an average breakeven price of about $46, according to Reuters and Deutsche Bank.
Lockdown easing boosts demand. Data is still scarce, but the loosening of stay-at-home orders across the world are thought to be boosting demand. Marco Dunand, the co-founder of oil trader Mercuria said that the oil market has “turned a corner,” according to the FT. “But if we have a second wave of pandemic then all bets are off,” he added. < If we keep having rolling shutdowns every time a new virus shows up, our standard of living will decline rapidly.
Oil shut ins raise questions. “We are on the precipice of forced well shut-ins totaling 15 to 20 million barrels of oil per day,” Clay Williams, chief executive officer for National Oilwell Varco Inc., told Bloomberg. However, there are lots of variables regarding the strategy and the economics of widespread shut ins, including how much production will be lost, which wells to shut, which to bring online, and wells may be damaged in the process.
Saudi foreign reserves fall. Saudi Arabia’s foreign reserves fell by $24 billion in March, the largest single-month decline in at least 20 years. Investors are betting that the financial pressure on several Persian Gulf countries will weaken their currency pegs. < As I have said for months in my podcasts, WTI under $50/bbl is UNSUSTAINABLE. NOT A SINGLE UPSTREAM ENTITY, INCLUDING SAUDI ARABIA, CAN SURVIVE $30 FOR MUCH LONGER. The OPEC Cartel members will start dropping like flies. Several are already failed states that will never recover.
Oil prices shot up on Tuesday on signs of rebounding demand and supply shut ins. President Donald Trump was notably excited by the news, tweeting the demand was returning. But it may not only be demand that is driving oil prices higher. DNB analyst Helge Andre Martinsen highlighted that “We are currently seeing accelerating oil-production curtailments outside the OPEC+ countries,”. He went on to suggest that the supply side of global oil markets “is about to change quite quickly.” < If WTI goes to $40/bbl tomorrow we might see the rate of decline in oil supply slow down, BUT OIL SUPPLY WILL KEEP FALLING UNTIL WTI IS WELL ABOVE $50/BBL. Upstream companies are not going to run out an ramp up drilling programs until they are sure oil prices will stay high.
Bakken output down 400,000 bpd. Roughly a third of North Dakota’s oil production has been shut in so far, down 400,000 bpd since March. The Bakken has some of the highest costs out of all U.S. shale, with an average breakeven price of about $46, according to Reuters and Deutsche Bank.
Lockdown easing boosts demand. Data is still scarce, but the loosening of stay-at-home orders across the world are thought to be boosting demand. Marco Dunand, the co-founder of oil trader Mercuria said that the oil market has “turned a corner,” according to the FT. “But if we have a second wave of pandemic then all bets are off,” he added. < If we keep having rolling shutdowns every time a new virus shows up, our standard of living will decline rapidly.
Oil shut ins raise questions. “We are on the precipice of forced well shut-ins totaling 15 to 20 million barrels of oil per day,” Clay Williams, chief executive officer for National Oilwell Varco Inc., told Bloomberg. However, there are lots of variables regarding the strategy and the economics of widespread shut ins, including how much production will be lost, which wells to shut, which to bring online, and wells may be damaged in the process.
Saudi foreign reserves fall. Saudi Arabia’s foreign reserves fell by $24 billion in March, the largest single-month decline in at least 20 years. Investors are betting that the financial pressure on several Persian Gulf countries will weaken their currency pegs. < As I have said for months in my podcasts, WTI under $50/bbl is UNSUSTAINABLE. NOT A SINGLE UPSTREAM ENTITY, INCLUDING SAUDI ARABIA, CAN SURVIVE $30 FOR MUCH LONGER. The OPEC Cartel members will start dropping like flies. Several are already failed states that will never recover.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group