Oil & Gas Prices - August 30

[dan_s]

Opening Prices:
> WTI is up 5c to $68.79/Bbl, and Brent is up 13c to $72.83/Bbl.
> Natural gas is down 9.7c to $4.291/MMBtu.

AEGIS Notes
Oil

Oil and gas producers in the Gulf of Mexico removed about 1.74 MMBbl/d, or 95.7% of crude production before Hurricane Ida reached Louisiana (BSEE)
> About 2.11 MMBbl/d of refining capacity (12% of U.S. total) was being shut or brought to reduced rates at plants along the Mississippi River (Bloomberg)
> Gasoline for October spiked over 4% higher in New York before paring back gains, while WTI traded mostly flat as gulf rigs escaped significant damage

Hedge funds further reduced bullish bets on WTI for the week ending Tuesday as net-long positions fell 7.1k contracts to 272,926 (CFTC)
> Net positions are now almost half of what they were in late June
> Managed money outright longs on WTI fell 1.35k contracts while shorts rose 5.82k

OPEC will hold its 20th OPEC and non-OPEC Ministerial Meeting on Wednesday, September 1
> OPEC and its allies are expected to continue with their planned revival of oil production as prices bounced back from the August dip (Bloomberg)
> The group has already relet about 45% of the production volume shuttered last spring
> The current plan will see the rest of the supply brought back in monthly installments of 400 MBbl/d through late 2022 < My Forecast: Within 12 months 100% of OPEC+ production capacity will be back online and the world will be short-oil.

Natural Gas

Gas prices are trading at their highest level since 2018, as Hurricane Ida knocks Gulf of Mexico (GoM) output offline
> U.S. weather forecasts turned cooler in the 1-5 day range, driven by moderating temperatures in the U.S. East
> The 6-10 day range shows much warmer weather in the U.S. West and Midwest regions
> The U.S. gas-weighted cooling degree day count forecast total for September decreased from 169 to 158 over the weekend

Ida strikes U.S. Gulf Coast with 150 mph. wind as a Category 4 hurricane
> GoM production is now at 0.15 Bcf/d, down more than 2 Bcf/d
> More than 1 million homes in Louisiana and 100,000 homes in Mississippi are without power
> So far, most LNG infrastructure has been out of the hurricane’s direct path

[dan_s]

On August 27, Reuters reported U.S. oil and gas companies on Friday cut more than 1.6 million b/d of oil production as a major storm churned toward oilfields that provide 17% of the nation's oil production. Production cutbacks ahead of Hurricane Ida exceed those during 2005's devastating Katrina. Oil companies had shut 59% of Gulf oil production and 49% of natural gas output, according to the U.S. offshore regulator. A total of 90 offshore facilities were evacuated and 11 drilling vessels moved out of harm's way. During Katrina, a hurricane that wreaked havoc in Louisiana, supplies were cut by up to 1.53 million b/d. Production outages lasted for weeks due to damaged platforms and refineries. Last year's Delta storm shut-in up to 1.69 million b/d.

On August 27, Bloomberg reported that Arabian Gulf Oil Co. in Libya will be forced to suspend all activities unless provided with the funds necessary to operate, according to a company statement. The company produces 280,000-300,000 b/d and exports crude through the eastern Hariga port.

August 26, Reuters reported that Asia is on track to record a nice rebound in oil imports in August. Overall, Asia’s top four crude buyers, China, India, Japan, and South Korea, are set to import about 21.13 million b/d in August, which is up 7.6% from July’s 19.64 million b/d, according to Kpler data.

On August 26, Bloomberg reported that Indian air travel has climbed sharply, according to the chairman of STIC Travel, which is one of India’s biggest travel agents, as he estimated that domestic flights this month are around 75% of pre-virus levels. That’s translated into the biggest month-on-month increase in jet fuel sales in more than a year, according to preliminary data for the first half of August, although sales are still 45% below the same period in 2019.

On August 23, IHS Markit reported that Eurozone’s flash Manufacturing PMI fell to 61.5 in August vs. July’s level of 62.8. Additionally, the flash Eurozone PMI composite output index, which looks at activity in both manufacturing and services sectors, came in at 59.5 in August, which is down from 60.2 in July.

[dan_s]

My take is that the pullback in the natural gas price today is concern that the power outages in Louisiana and Mississippi will result in lower natural gas demand, which it will. However, with all the offshore platforms offline we should see much lower supply as well. I expect a bullish ngas storage report for the week ending August 27. Weather was bullish last week.

[mrbill]

People are using a lot of propane for generators and cooking.

[dan_s]

Closing Prices:
> WTI prompt month (OCT 21) was up $0.47 on the day, to settle at $69.21/Bbl.
> In contrast, NG prompt month (OCT 21) was down $0.083 on the day, to settle at $4.305/MMBtu.

Mr. Bill: Good point about propane. We lost power for one day during Winter Storm Uri and I went to several places to find propane and they were all sold out.