Oil & Gas Prices - May 20

[dan_s]

Opening Prices:
> WTI is down 57c to $62.79/Bbl, and Brent is down 68c to $65.98/Bbl.
> Natural gas is down 0.1c to $2.963/MMBtu.

AEGIS Notes
Crude Oil

Iran’s president Hassan Rhousani said world powers have accepted that major sanctions on his country will be lifted – Bloomberg
According to Citi, the most bearish scenario would entail Iran reaching 4 MMBbl/d from 2.4 MMBbl/d in a few months
Iran holds a presidential election on June 18, which adds pressure to both sides to reach a deal before a new government takes over

Europe’s oil demand gets a boost as drivers get back on the roads
Traffic on European countries, Spain and France, roads are only slightly down from 2019
In Poland, agency figures show traffic levels are now higher than two years ago
The vaccine is likely underpinning the recovery, as the European Union is second in vaccine doses administered per day, behind only mainland China
Overall European demand is still down due to Jet Fuel and other fuels. Still, the improving demand outlook is cause for optimism
Remember, as demand goes up the Days of Consumption goes down. When OECD inventories go below 28 days of consumption, WTI has a shot at $100/bbl.

The market received mixed data reported by the EIA on Wednesday
The EIA reported a build of + 1,320 MBbls for the week ending May 14, above the estimate of a + 1,310 MBbls build
Inventories for the US are now at a deficit of 45.465 MBbls to last year and a deficit of 7.28 MBbls to the five-year average
Gasoline and distillate inventories fell by 1.96 MMBbls and 2.32 MMBbls

Natural Gas

Natural gas prices for the next 10-12 month have rallied substantially since early April
Despite the previous two-day pullback, Bal Summer 2021 and Winter 2021-2022 are at or near recent highs at $3.02 and $3.19, respectively - last seen on Oct. 30 last year and in February 2021

AEGIS notes for this summer that coal starts to take large bites out of gas demand above $3.15-$3.20/MMBtu
We also note that this is not the gas price limit but acts as a decelerator as gas starts to lose out more to coal in the power stack as gas prices rise into the low $3’s and beyond. < I think it should be noted that utilities may stick with natural gas longer because of pressure to keep carbon emissions low.

Venture Global LNG CEO Michael Sabel said US liquefaction project developers’ success in advancing new projects hinges in part of their ability to keep costs low enough to compete with coal globally (Platts)
Speaking at the US Chamber of Commerce’s Global Forum of economic recovery, Sabel said natural gas can continue to maintain its share of the energy mix as long as it’s able to build sufficient infrastructure
He warned that without continued growth in gas exports, “you’re going to have a lot of renewables and a lot of coal.”
Venture Global’s own Calcasieu Pass LNG facility is under construction in Louisiana and is likely to take gas in late 2021, a full year ahead of schedule

[dan_s]

Closing Prices:
> WTI prompt month (JUN 21) was down $1.31 on the day, to settle at $62.05/Bbl.
> NG prompt month (JUN 21) was down $0.039 on the day, to settle at $2.925/MMBtu.

Keep in mine that the prices above are more than what I am using in all of my forecast/valuation models for Q2 ($60 for WTI and $2.75 for HH gas).