Opening Prices:
> WTI is up 40c to $35.84/Bbl, and Brent is up 61c to $38.93/Bbl.
> Natural gas is up 1.9c to $1.793/MMBtu.
Closing Prices:
> WTI prompt month (JUL 20) was up $1.37 on the day, to settle at $36.81/Bbl.
> NG prompt month (JUL 20) was up $0.003 on the day, to settle at $1.777/MMBtu.
Oil markets in Asia and Europe traded higher Tuesday, with traders looking ahead to the next meeting of the major producers amid expectations they will agree to extend record production cuts.
At 8:45 AM ET (1245 GMT), U.S. crude futures traded 1.6% higher at $35.99 a barrel. The international benchmark Brent contract rose 2% to $39.10.
Oil prices have soared over the past six weeks, thanks to record supply cuts by the Organization of the Petroleum Exporting Countries and allies, including Russia, a group dubbed OPEC+. However, prices are still down about 40% for the year so far.
These supply cuts are set to be scaled back at the end of June, according to the agreement hammered out in April, but these OPEC+ producers are now said to be considering extending their production cuts into July or August, at an online meeting likely on June 4.
“Russia will be the key obstacle in any extension, and they are unlikely to agree on any extension which goes beyond a couple of months,” said analysts at ING, in a research note to clients.
Russia has not always been the most reliable partner in terms of adhering to agreed supply levels, but the country’s oil and gas condensate production fell to 39.7 million tonnes (9.39 million barrels per day) in May, near its target under the deal within the OPEC+ group, Interfax news agency reported on Tuesday, citing energy ministry data.
The coalition -- which includes OPEC’s 13 members plus another 10 exporters -- has achieved 92% compliance, according to data analytics firm Kpler. Iraq and Nigeria have been laggards in meeting their pledged targets.
Meanwhile, onshore oil exploration in the U.S. shrank for the 11th consecutive week to a level not seen since before the shale revolution kicked off more than a decade ago.
That said, the market received a tentative sign that U.S. oil production is slowly re-starting as Parsley Energy (PE), a U.S. mid-sized shale producer, announced plans to "restore the vast majority of curtailments in early June". In May, it reduced output by around 26,000 barrels a day due to the low oil price.
Attention will now turn to the American Petroleum Institute’s weekly report on U.S. inventories of crude and refined products, at 4:30 PM ET.
Oil & Gas Prices - June 2
Oil & Gas Prices - June 2
Last edited by dan_s on Tue Jun 02, 2020 4:59 pm, edited 1 time in total.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - June 2
This is interesting news: "The Russian and US presidents today discussed the oil markets and the ongoing Opec+ agreement, ahead of a series of meetings that may happen this week."
Read: https://www.argusmedia.com/en/news/2110 ... c-meetings
Raymond James on 6-1-2020:
"Our expectation is that oil demand and pricing continues to rebound in the back-half of 2020 and into 2021 when economic re-openings (every
state has begun loosening restrictions) should be largely completed. As such, we think that while a small amount of shut-in production will never
be successfully brought back (maybe 5%), said production isn't enough to move the needle in 2021 or going forward. In our view, the drastic
decline in drilling activity and capital budgets are set to have a much more lasting and far-reaching impact on natural gas supply."
Read: https://www.argusmedia.com/en/news/2110 ... c-meetings
Raymond James on 6-1-2020:
"Our expectation is that oil demand and pricing continues to rebound in the back-half of 2020 and into 2021 when economic re-openings (every
state has begun loosening restrictions) should be largely completed. As such, we think that while a small amount of shut-in production will never
be successfully brought back (maybe 5%), said production isn't enough to move the needle in 2021 or going forward. In our view, the drastic
decline in drilling activity and capital budgets are set to have a much more lasting and far-reaching impact on natural gas supply."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - June 2
More from Raymond James:
"As we discussed in our recent E&P earnings lookback, budgets among large-cap operators have been cut-in half in 2020 and spending is on track
to be reduced again next year which will have drastic consequences for natural gas supply moving forward. This is despite the fact that almost the
entirety of the reduction is set to be in "oil-plays" (Bakken, Permian, Eagle Ford, Niobrara, Mid-Con) as, remarkably (and despite the misnomer),
these plays were responsible for half the gas supply growth in 2019, and were expected until recently to keep gas markets well-supplied in the
future. COVID-19 and a (brief) Saudi-Russia price war shattered those expectations, and we now forecast associated gas to be responsible for the
majority of natural gas production declines in 2021 (to the tune of 2 bcf/d in the Permian alone), even under RJ's bullish price deck ($50 WTI in
2021). While the writing had been on the wall regarding associated gas declines for some time now (see our last gas update), the scale of the
slowdown in activity in oil plays has become increasingly clear in recent weeks. In contrast, gas directed drilling has remained healthy. To illustrate,
the Haynesville now trails only the Permian in rigs (where they have held better than most but are still down over 60%), the DJ rig count has shrunk
to the single digits, and frac activity has declined by over 2/3 in May since February. Looking forward, our updated supply model assumes rigs
continue to drop and bottom at ~210 in September (currently at 301 rigs), mostly due to further reductions in oil-plays but with a material 20%
drawback in gas-rigs from current levels (lower spot prices have consequences). Rigs then rebound in the Haynesville and Appalachia early next
year to reach the levels they entered 2020 with (80 combined at YE19, versus ~60 now), while operators complete wells at a slightly faster pace by
continuing to draw down their DUC inventory (drawn over 200 in Appalachia in the last year according to the EIA)."
"As we discussed in our recent E&P earnings lookback, budgets among large-cap operators have been cut-in half in 2020 and spending is on track
to be reduced again next year which will have drastic consequences for natural gas supply moving forward. This is despite the fact that almost the
entirety of the reduction is set to be in "oil-plays" (Bakken, Permian, Eagle Ford, Niobrara, Mid-Con) as, remarkably (and despite the misnomer),
these plays were responsible for half the gas supply growth in 2019, and were expected until recently to keep gas markets well-supplied in the
future. COVID-19 and a (brief) Saudi-Russia price war shattered those expectations, and we now forecast associated gas to be responsible for the
majority of natural gas production declines in 2021 (to the tune of 2 bcf/d in the Permian alone), even under RJ's bullish price deck ($50 WTI in
2021). While the writing had been on the wall regarding associated gas declines for some time now (see our last gas update), the scale of the
slowdown in activity in oil plays has become increasingly clear in recent weeks. In contrast, gas directed drilling has remained healthy. To illustrate,
the Haynesville now trails only the Permian in rigs (where they have held better than most but are still down over 60%), the DJ rig count has shrunk
to the single digits, and frac activity has declined by over 2/3 in May since February. Looking forward, our updated supply model assumes rigs
continue to drop and bottom at ~210 in September (currently at 301 rigs), mostly due to further reductions in oil-plays but with a material 20%
drawback in gas-rigs from current levels (lower spot prices have consequences). Rigs then rebound in the Haynesville and Appalachia early next
year to reach the levels they entered 2020 with (80 combined at YE19, versus ~60 now), while operators complete wells at a slightly faster pace by
continuing to draw down their DUC inventory (drawn over 200 in Appalachia in the last year according to the EIA)."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - June 2
The Energy Report: Oil's Big Rebound
By Phil Flynn Jun 02, 2020 10:25AM ET
Oil prices are on the rise again as it appears that OPEC and Russia are poised to extend production cuts. The big question mark, as usual, is Russia, with what seems to be uncertainty about how long they want to extend cuts. They say they will wait until Tuesday to make a decision. Mexico may also be a problem, yet it is clear that if OPEC plus wants to see oil prices continue to rise, they should extend cuts.
Regardless, it appears that OPEC Plus will meet early on June 5th to iron out the details, and the market is betting they will extend cuts by at least one month until the end of July. Yet what is amazing in this market are signs of tightening supply globally. Brent crude is on track to test $40.00 and has now gone from contango to backwardation. That is signaling that the market has gone from oversupplied to undersupplied. Demand in Germany, along with China, has exceeded pre-coronavirus levels indicating that oil demand globally will be back in a big way and much faster than many people thought.
In the U.S. we get the American Petroleum Institute (API) report at 3:30pm central time. Oil inventories have increased in recent weeks as Saudi oil takers are getting offloaded. That is masking the massive and historic pullback by U.S. shale and oil producers that could see the U.S. market tighten before you know it. U.S. rigs have fallen by 70% year over year.
The energy market also needs to keep an eye on the Atlantic. Tropical storms and hurricane risk are rising. With U.S. shale shutting down, hurricane risk premium in oil and natural gas could increase in a hurry.
Despite the many doom and gloom predictions about stocks and oil, we are acting strong. Even the unrest in the U.S. is failing to quell market optimism. Don’t fight the momentum.
By Phil Flynn Jun 02, 2020 10:25AM ET
Oil prices are on the rise again as it appears that OPEC and Russia are poised to extend production cuts. The big question mark, as usual, is Russia, with what seems to be uncertainty about how long they want to extend cuts. They say they will wait until Tuesday to make a decision. Mexico may also be a problem, yet it is clear that if OPEC plus wants to see oil prices continue to rise, they should extend cuts.
Regardless, it appears that OPEC Plus will meet early on June 5th to iron out the details, and the market is betting they will extend cuts by at least one month until the end of July. Yet what is amazing in this market are signs of tightening supply globally. Brent crude is on track to test $40.00 and has now gone from contango to backwardation. That is signaling that the market has gone from oversupplied to undersupplied. Demand in Germany, along with China, has exceeded pre-coronavirus levels indicating that oil demand globally will be back in a big way and much faster than many people thought.
In the U.S. we get the American Petroleum Institute (API) report at 3:30pm central time. Oil inventories have increased in recent weeks as Saudi oil takers are getting offloaded. That is masking the massive and historic pullback by U.S. shale and oil producers that could see the U.S. market tighten before you know it. U.S. rigs have fallen by 70% year over year.
The energy market also needs to keep an eye on the Atlantic. Tropical storms and hurricane risk are rising. With U.S. shale shutting down, hurricane risk premium in oil and natural gas could increase in a hurry.
Despite the many doom and gloom predictions about stocks and oil, we are acting strong. Even the unrest in the U.S. is failing to quell market optimism. Don’t fight the momentum.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group