Oil & Gas Prices - Dec 31

[dan_s]

My December newsletter, "The View From Houston" will be sent to all EPG members on Sunday, January 2. My "Editors" think the New Year's Holiday starts today.
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Opening Prices:
> WTI is down $1.44 to $75.55/Bbl, and Brent is down $1.29 to $78.24/Bbl.
> Natural gas is up 6.5c to $3.626/MMBtu.

AEGIS Notes
Oil

WTI is trading $1.44 lower, near $75.55
> The prompt-month WTI contract is on track for a $1.75-gain on the week
> WTI crude futures rose this week as markets read signs of declining supplies and increasing production costs as possible factors supporting oil prices

New data also showed the efficacy of Covid-19 vaccines against the Omicron variant; The severity of Omicron is now expected to be less than previous variants

Saudi Arabia contemplates deep cuts to February ‘22 prices vs January ‘22
> Feb OSPs may fall to their lowest level in three to four months
> The producer is expected to cut official selling prices of all grades by more than $1/bbl in February from the previous month, a Reuters survey showed
> The Dubai market structure has weakened significantly with backwardation narrowing sharply this month, implying that market tightness is easing < Keep in mind that oil demand is "seasonal" with demand for transportation fuels always low in January & February. Demand for crude oil ramps up sharply in March & April as refiners must build their raw material inventories to meet sharp increases in demand for transportation fuels each summer. "Summer Blend Gasoline" requires more crude oil than "Winter Blend Gasoline".

Natural Gas

Natural gas prices are up by 6c this morning, near $3.626
> U.S. gas futures are on track for their strongest annual performance since 2016, up over $1/mmBtu compared to where the prompt was trading in January 2021, but still well below it’s highs of $6 in October and November
> The EIA reported a 136-Bcf withdrawal for the week ending December 24, which compares to the 5-yr average draw of 114 Bcf.
> The withdrawal was in line with what most analysts were expecting and is the largest of the heating season so far
> The surplus to the five-year average is now 19-Bcf

Mountain Valley Pipeline receives key approval from West Virginia Department of Environmental Protection
> West Virginia’s approval follows that of Virginia’s on the natural gas pipeline's water protection plan individual permit
> The 2 Bcf/d pipeline runs from West Virginia to Virginia
> The pipeline is still on track for a summer '22 in-service date < Good news for AR, CTRA, EQT and RRC