Oil & Gas Prices - Feb 19

[dan_s]

Opening Prices:
> WTI is down 84c to $59.68/Bbl, and Brent is down 69c to $63.24/Bbl.
> Natural gas is up 4.7c to $3.129/MMBtu.

AEGIS Morning Notes
Crude Oil

Crude futures give up gains from earlier in the week, retreating from its intra-week high of $61.14 reached during the height of the storm on Tuesday
Texas producers begin restarting wells following the deep freeze that knocked out over 4 MMBbl/d (40%) of the country’s oil supply (Reuters)

Iran rejects U.S. bid to start talks before the U.S. rejoins the JCPOA

Citigroup estimates that as much as 1MMBbl/d of Permian oil could remain offline over the next ten days
Freezing weather may have damaged equipment which could stymie the return of production. Still, as the power returns to shale fields, most of the output should return quickly
Several U.S. Gulf Coast refineries were damaged during the storm and will require repairs which may take several weeks to get back to full operations. During the height of the storm, crude processing capacity fell by 5.5 MMBbl/d, according to Energy Aspects

President Joe Biden said it would be willing to meet with Iran to discuss sanctions and the JCPOA (Bloomberg)
Iran responded by saying that the U.S. must first return to the Iran nuclear deal and lift sanctions if it wants talks with the Islamic Republic
AEGIS notes if Iran sanctions are eased, a potential 1.8 MMBbl/d in exports could return to the market, adding pressure to the global S&D balance

Natural Gas

Regional natural gas spot market prices in the Central and Western U.S. plunged February 18, as production started to stabilize and recover and heating demand continued to wane (Platts)
Midcontinent prices like ONEOK and ANR Southwest both retreated triple digits on Thursday
ANR price changes over the past week:
> 2/16 Tue, $125.34
> 2/17 Wed, $151
> 2/18 Thur, $17.61

Bloomberg data
Production appeared to stabilize around 75.4 Bcf/d on February 18, still down about 15 Bcf/d over the past 10 days, according to Platts data
U.S. natural gas posted the largest withdrawal of the winter last week with a pull of 237 Bcf. Analysts were expecting around a 250 Bcf withdrawal
Storage now stands at 2.281 Tcf for the week ended February 12, which is close to the five-year average
Look out for next week’s EIA release, as gas withdrawals this week are expected to record the largest pull on gas storage in history. Platts Analytics’ is modeling a 369 Bcf draw for the week-ended February 19 which compares to the 5-year average draw for this week of 128 Bcf.

AEGIS notes that this week’s circumstances can make it difficult to pin down an accurate storage estimate with traditional production sampling methods ill-equipped

The Texas power grid was “seconds and minutes” away from major failure that would have put most of Texas in the dark for months (Texas Tribune)
Grid operators had to start rolling blackouts quickly to cut the amount of power distributed because if they would of waited “then what happens in that next minute might be that three more units come offline, and then you’re sunk,” said Bill Magness, president of ERCOT
If the grid would have allowed power demand to outstrip supply of generation then the equipment would catch fire and cause substations to blow and power lines to go down
Senior vice president at Enverus, Bernadette Johnson, said if the grid would have gone totally offline, the physical damage would have taken months to repair

MY TAKE: It is time for Texas to say NO to anymore wind and solar until we have enough gas fired power plants built to insure we NEVER let this happen again. I have nothing against renewable energy but it is unreliable. We must have a power supply that can handle bad weather.

[dan_s]

Crude oil prices ease as US recovers from weather disruption, profit taking . S&P Global .
Crude futures weakened during midmorning trade in Asia Feb. 19 as the support received from supply disruptions in the US due to freezing temperatures eased, allowing prices to return to fundamental values, market sources said. The US Energy Information Administration's weekly inventory report released late Feb. 18 estimated a 7.3 million barrel draw in crude inventories the week ended Feb. 12. The EIA also reported a 3.4 million draw in distillate inventories and a smaller-than-expected build of 700,000 barrels in gasoline inventories over the same period.

Arctic blast delivers historic blow to U.S. oil output . Houston Chronicle .
The Arctic blast wreaking havoc across Texas has caused the largest disruption to U.S. oil production in history, pushing crude prices over $60 a barrel. U.S. oil production has fallen by a third, or an estimated 3.5 million barrels per day, after freezing temperatures immobilized well equipment, knocked out communications to remotely operated wells and made travel treacherous for oil-field workers looking to restart or repair facilities.

U.S. natural gas shortage hampers blackout recovery . Wall Street Journal .
A giant shortage of natural gas is hindering a recovery from the devastating cold spell that left millions without power in the nation’s midsection. Natural gas production across the U.S. has fallen about 20% over the last week, a rapid decline driven by frozen oil and gas wells and pipeline infrastructure in Texas and other states.

[k1f]

<< MY TAKE (Dan): It is time for Texas to say NO to anymore wind and solar until we have enough gas fired power plants built to insure we NEVER let this happen again. I have nothing against renewable energy but it is unreliable. We must have a power supply that can handle bad weather.>>

Green energy is only 10% in Texas. The freeze also stopped NG and hydrocarbon wellheads. Seems like Texas should winterize systems and rejoin the big government grid to insure power supplies.

[dan_s]

Closing Prices:
> WTI prompt month (MAR 21) was down $1.28 on the day, to settle at $59.24/Bbl.
> NG prompt month (MAR 21) was down $0.013 on the day, to settle at $3.069/MMBtu.

ERCOT should do what is right for Texas and focus on using the massive amount of natural gas reserves as the base load for the state's power generation. Wind and Solar are NOT RELIABLE and should only be used as supplemental power generation. They are great in the summer months.
This week's weather was extremely cold for Texas, maybe once in a lifetime stuff. However, ERCOT's job is to make sure the citizens of Texas have reliable electricity.

Update: Heading into 2021
In Texas wind is 17.41% and solar is 0.91% of the state's electricity grid mix.

[sundance]

How much of the recent oil price increase do you think has been caused by the decrease in the value of the U S dollar?