Oil & Gas Prices - Jan 31

[dan_s]

Opening Prices:
> WTI is up 70c to $87.52/Bbl, and Brent is up 119c to $91.22/Bbl.
> Natural gas is up 16.9c to $4.808/MMBtu.

AEGIS Notes
Oil

Oil markets are headed for their best January in at least 30 years as the degree of market tightness shifted market sentiment more bullish (BBG)
> The combination of strong demand and supply disruptions further reduced global stockpiles, with big-name banks and oil companies saying prices may soon eclipse $100/Bbl
> OPEC+ plan to meet on Wednesday to assess the market < I expect their "official quotas" to be raised another 400,000 bpd, but in the real world OPEC+ is out of spare capacity already.

Money managers increased their WTI spread positions by the most since 2017 last week (CFTC data)
> Outright short bets were cut to the lowest since June, though long positions fell by the most since November

Gasoline markets around the globe are soaring as oil marches toward a 7-year high (BBG)
> Global stockpiles of oil-based products are at a multi-year low for this time of year
> Gasoline profits have hovered well above seasonal norms as more people take to the roads in greater numbers, boosting demand
> Analysts remain bullish on gasoline demand for 2022, with the IEA estimating world gasoline demand will near-pre-pandemic levels this year while Energy Aspects predicted consumption would surpass that

Natural Gas

U.S. natural gas prices surged as a winter storm hit the Northeast over the weekend
> The prompt-month (Mar ’22) gas contract is up by 16.9c this morning, near $4.808, after reaching $5.07/MMBtu during early-session trading on Sunday
> The gas-weighted heating degree day forecast for February fell by 10 HDDs over the weekend, to 778 HDDs
> The winter storm has incited renewed fears of a supply crunch as Central Park was hit with over 8” of snow, and Boston set a new daily record
> The “Widowmaker” (Mar-Apr) spread surged to 28.7c, its highest since December 1. The move was very strong for this late in the winter season, with the only jump in recent memory coming during Winter Storm Uri, and the spread is now at its highest seasonal level since 2014
> U.S. lower 48 dry gas production is near 93 Bcf/d, according to this morning’s pipeline nominations, still, 3 Bcf/d below its high of 96 Bcf/d reached in December
> Appalachian dry gas production has continued to slide lower and is now just below 32.5 Bcf/d, offsetting any gains in the South Central region

Global natural gas demand set to fall due to declining European demand, IEA says
> The IEA said that global demand growth would slow to 0.9% in 2022 after gaining 4.7% in 2021
> European gas demand is forecast to plunge by -4.5% in 2022, in contrast to a gain of 5.5 % in 2021
> Gas demand for power generation will come under pressure as renewables come online at a record pace, while high gas prices incentivize gas-to-coal switching
MY TAKE: Europe is doomed to have more power outages as they increase dependence on wind and solar.

[dan_s]

Trading Economics:
"WTI crude futures traded above $88 a barrel on Monday, remaining close to levels not seen since 2014 and are on track to book a more than 17% gain for the January month, the strongest since February 2021, amid robust demand, tight supply and falling inventories. Geopolitical tensions in Eastern Europe and the Middle East are raising worries of supply disruptions and commercial oil and fuel stocks in OECD countries are at their lowest levels in seven years, according to the IEA. Moreover, OPEC+ is set to stick with a planned 400,000 bpd production increase for March when it meets this week but the group has failed to meet output targets as some members struggled with capacity constraints."

Keep in mind that oil demand is seasonal. Over the next three months, demand for transportation fuels will increase by more than 2 million barrels per day and OPEC+ is already tapped out.

[dan_s]

Oil is going to $100/bbl within a few months.
Read: https://www.zerohedge.com/commodities/9 ... -beginning