Oil & Gas Prices - Jan 11

[dan_s]

Opening Prices:
> WTI is down 46c to $51.78/Bbl, and Brent is down 79c to $55.20/Bbl.
Aegis Hedging Solutions note: "The UP Trend continues. Buyers comfortably remain in Control above $49.75/bbl. We recommend clients continue to target scaled up Market Driven hedges from $47/bbl up to $52/bbl in Bal 2021 and Cal 2022."

> Natural gas is down 5.4c to $2.646/MMBtu.
Aegis Hedging Solutions note: "Buyers are fighting to maintain Control above ~$2.67/MMBtu. Market-Driven hedges are available in Bal 2021 above $2.75/MMBtu. A breakout above $2.77/MMBtu would change Trend to UP; otherwise, the market is rangebound."

On January 7 Bloomberg reported that tens of billions of dollars worth of commodity investments are about to be switched around as crude oil’s 20% decline in 2020 has led to the value of oil being below its target weight in the S&P GSCI Index and the Bloomberg Commodities Index. Investment products that track the S&P GSCI and the Bloomberg Commodities Index are followed by billions of dollars in passive, long-only funds. As a result, as much as $9B of oil contracts could be purchased over the five days of rebalancing that starts on Friday, according to Citigroup. CEO of Black Gold Investors Gary Ross said, “If you start increasing financial length by 80-100 million barrels, you push up the price $2-$3, all other things being equal.”

On January 6 Reuters reported traders have accelerated crude oil sales from floating storage in December to meet higher demand in Asia as the region's refineries throttled up for peak winter consumption, trade sources and analysts said. The drop in excess global stored oil and a sudden decision by world's top exporter Saudi Arabia for extra output cuts in the next two months are expected to keep supplies snug and support prices. "Oil prices are up, and backwardation has widened in expectation of a tighter crude market," said Serena Huang, Asia lead analyst at data analytics firm Vortexa.

January 11 Aegis Hedging Solutions morning notes:
Crude Oil

Oil rally loses steam on new coronavirus infections and the resulting lockdowns (Reuters)
The recovery in oil demand has stalled in Europe, as several countries impose new forms of lockdowns to mitigate the spread. However, the real shock is coming out of China, where cases are now increasing at their highest rate in six months. Shijiazhuang, the provincial capital and epicenter of the new outbreak, is in lockdown, and all outgoing travel activity has been brought to a halt

The dollar has also rallied to pressure oil prices further. The dollar index (DXY) has risen by 45 pips to 90.552 < Compares to 52-week high of 102.99
Major OPEC producers raise crude prices on barrels bound for Asian markets (Bloomberg)
Iraq, Abu Dhabi, and Kuwait all follow suit raising pricing on oil grades headed to Asia after Saudi Arabia announced a similar move last week
AEGIS notes the market is watching to see how Asian refiners/purchasers react to the increase in crude prices.
Buyers may have the option of snapping up cheaper barrels elsewhere, namely the U.S.

Indian oil demand fell for the first time in over two decades in 2020
Total petroleum product demand decreased by 10.8%, bringing consumption to a five-year low of 193.4 MM tons
Still, gasoline consumption saw a 9.3% year-over-year increase in December ’20 as demand returned.
Indian and Asian demand has been a bright spot in an otherwise gloomy demand picture over the last few months

Natural Gas

The Department of Energy (DOE) announces new short-term LNG export process that will streamline authorizations
In the new process, long-term LNG exporters with approval will no longer have to submit separate applications to the DOE for the same short-term volumes (PointLogic)
Deputy Secretary of Energy Mark W. Menezes said “We are increasingly seeing more sales of LNG on the spot market, and this action by DOE is allowing more flexibility for U.S. LNG exporters. With this policy, U.S. LNG exporters can let the market—not our regulatory process—determine which LNG cargos will be exported under long-term or short-term agreements on the spot market.”

Shipping rate for LNG Atlantic hits record high of $300,000/d
The Atlantic shipping rate for LNG spot tankers was up $95,000/d from $205,000 on January 7 to $300,000 on January 8 (Platts)
Wide gas arbitrages, combined with low tanker availability combine to create an environment with skyrocketing prices for vessels headed to East Asia as JKM prices continue to break records
Shipping costs are usually somewhere between 5%-20% of the delivered price of LNG, meaning large fluctuations in rates charged can have a significant impact on the final price of delivered gas

Washington state proposes legislation to become carbon-free; phase out natural gas utility services < Get ready for higher electricity bills in the state.
The state would establish a clean heat standard to limit gas expansion distribution systems and promote the use of non-carbon emitting electric equipment and clean fuel production and distribution (Platts)
New legislation incentivizes the move toward electrification for public utility districts and municipal utilities that convert to electric heat pumps and offer technical assistance to utilities and housing providers

Appalachian gas basis has moved higher as meteorologist warns about the potential for a polar vortex in the central and easter U.S. later this month (Platts)
Dominion South gas basis since late December have surged to their highest since mid-November, up nearly 30% to settle at an average of $2.27/MMBtu on Jan. 7, according to Platts
Freeze-offs pose a threat to supply if weather turns cold

Liquefied natural gas prices in Asia have soared as a blast of cold weather in northeast Asia and a shortage of ships for gas transport have impacted prices
The Japan-Korea Marker, or JKM price, has been assessed at $21.45/MMBtu on Friday, up 42% so far in 2021 (WSJ)

[dan_s]

Baker Hughes reported on Friday that the number of oil and gas rigs in the United States rose by 9 to 360. The oil and gas rig count has risen for seven weeks in a row for a total gain of 50. The oil rig count increased by 8 this week, while the number of gas rigs increased by 1. The number of miscellaneous rigs was also unchanged. Total oil and gas rigs in the United States are now down by 421 compared to this time last year.

[dan_s]

Closing Prices:
> WTI prompt month (FEB 21) was up $0.01 on the day, to settle at $52.25/Bbl.
> Also, NG prompt month (FEB 21) was up $0.047 on the day, to settle at $2.747/MMBtu.