AEGIS Hedging Solutions has invited all EPG member to attend this important webinar tomorrow.
Subject: Gas and NGLs are all undersupplied for next winter; What latest OPEC+ news means for the oil price
Join us on Thursday, March 4th at 12 p.m. CST to hear more about:
Market Update Topics:
Extreme winter cash prices may be gone, but summer may hold some bullish cash surprises, too.
Why forecasted LNG cancellations and power-demand losses are bullish for gas. Yes, bullish.
What to look for in the impending OPEC+ meeting
Natural Gas Liquids (NGLs) are outperforming many products. We identify the factors that could limit prices moving higher.
Two profit threats to manage: rising interest rates and steel prices
If you own any of our "gassers" or midstream companies I HIGHLY RECOMMEND you join me on this webinar tomorrow.
A very important webinar on March 4
A very important webinar on March 4
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: A very important webinar on March 4
From Phil Flynn
OPEC+ News: Reuters is reporting that the increase may not be a done deal even though I think it is. Reuters reports OPEC and allies, known as OPEC+, are considering rolling over oil production cuts from March into April instead of raising output because of fragile oil demand recovery due to persisting worries about the coronavirus, three OPEC+ sources told Reuters. OPEC+ ministers hold a full meeting on Thursday. The market had been widely expecting OPEC+ to ease production cuts, which have been the deepest ever, by around 0.5 million barrels per day (bpd) from April.
Oil also got support from massive product draws reported from API. The impact from the Texas power crisis that shut down refineries caused a 9.933-million-barrel drop in gasoline supply and an equally massive 9.053 million barrel drop in distillate supply. So even a 7.356 increase in crude supply looks small as refiners will have a lot of work to do to increase supply. < EIA reported a much larger build in crude oil inventories that looks like a error to me.
We think the worries about OPEC+ raising output is overblown. As we have said for months, the global oil market is headed into a long-term deficit situation. While an OPEC increase in production may cool prices in the short term, in the long term the dye has been cast. Not only will the market be undersupplied in the latter part of the year as demand comes back as more vaccines are available, but the lack of oil investment will lead us to a supply gap that could leave the oil market tight for at least a decade.
We are seeing woefully low investment in oil exploration and drilling in part because we are being told that we are headed towards peak demand. Yet the reality is that even under the best-case scenarios, oil demand will grow for the next 20 years. The problem is that the oil will not be there. Cheap oil anyway. That is why we have been warning for months to not take this market for granted. Hedgers hedge on breaks. Lately, we have been seeing market whipsaws on headlines. Dates should get more bullish as we go. If OPEC causes a price break, use it to add to long-term positions.
Iran reportedly is shopping around for oil buyers in a sign they may come to the table with the Biden administration. So, a win for Iran’s oil producers and a loss for U.S. producers.
It might be time to buy natural gas calls as well. Andrew Weissman of EBW Analytics says that the April natural gas contract has gained 6.8¢ early this week to recover one-third of last week’s losses. Technical support helped the rebound, but mid-March forecast uncertainty—with bearish numerical models pitted against analog patterns and a Madden Julian Oscillation suggestive of cold potential—may decide if the rally can continue beyond key resistance near $2.92/MMBtu.
The longer-term seasonal outlook for natural gas remains resolutely bullish, with recent production, LNG, and economic projections—and planned LDC injections picking up steam in the back half of April—pointing to significant gains. Still, the next 30-45 days may favor range-bound trading on declining seasonal demand, a post-winter production bump, and heightened demand outages delay the realization of a vastly undersupplied market.
OPEC+ News: Reuters is reporting that the increase may not be a done deal even though I think it is. Reuters reports OPEC and allies, known as OPEC+, are considering rolling over oil production cuts from March into April instead of raising output because of fragile oil demand recovery due to persisting worries about the coronavirus, three OPEC+ sources told Reuters. OPEC+ ministers hold a full meeting on Thursday. The market had been widely expecting OPEC+ to ease production cuts, which have been the deepest ever, by around 0.5 million barrels per day (bpd) from April.
Oil also got support from massive product draws reported from API. The impact from the Texas power crisis that shut down refineries caused a 9.933-million-barrel drop in gasoline supply and an equally massive 9.053 million barrel drop in distillate supply. So even a 7.356 increase in crude supply looks small as refiners will have a lot of work to do to increase supply. < EIA reported a much larger build in crude oil inventories that looks like a error to me.
We think the worries about OPEC+ raising output is overblown. As we have said for months, the global oil market is headed into a long-term deficit situation. While an OPEC increase in production may cool prices in the short term, in the long term the dye has been cast. Not only will the market be undersupplied in the latter part of the year as demand comes back as more vaccines are available, but the lack of oil investment will lead us to a supply gap that could leave the oil market tight for at least a decade.
We are seeing woefully low investment in oil exploration and drilling in part because we are being told that we are headed towards peak demand. Yet the reality is that even under the best-case scenarios, oil demand will grow for the next 20 years. The problem is that the oil will not be there. Cheap oil anyway. That is why we have been warning for months to not take this market for granted. Hedgers hedge on breaks. Lately, we have been seeing market whipsaws on headlines. Dates should get more bullish as we go. If OPEC causes a price break, use it to add to long-term positions.
Iran reportedly is shopping around for oil buyers in a sign they may come to the table with the Biden administration. So, a win for Iran’s oil producers and a loss for U.S. producers.
It might be time to buy natural gas calls as well. Andrew Weissman of EBW Analytics says that the April natural gas contract has gained 6.8¢ early this week to recover one-third of last week’s losses. Technical support helped the rebound, but mid-March forecast uncertainty—with bearish numerical models pitted against analog patterns and a Madden Julian Oscillation suggestive of cold potential—may decide if the rally can continue beyond key resistance near $2.92/MMBtu.
The longer-term seasonal outlook for natural gas remains resolutely bullish, with recent production, LNG, and economic projections—and planned LDC injections picking up steam in the back half of April—pointing to significant gains. Still, the next 30-45 days may favor range-bound trading on declining seasonal demand, a post-winter production bump, and heightened demand outages delay the realization of a vastly undersupplied market.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group