Oil & Gas Prices - Feb 1

[dan_s]

Opening Prices:
> WTI is down 79c to $87.36/Bbl, and Brent is down 80c to $88.46/Bbl.
> Natural gas is down 20.5c to $4.669/MMBtu.

AEGIS Notes
Oil

West Texas Intermediate remains near seven-year highs as OPEC’s technical committee meets today
> All members OPEC and its allies will convene tomorrow to discuss its oil policy and decide whether to further increase supply
> Consensus is that OPEC+ will increase production by another 400 MBbl/d, but Goldman Sachs warned the recent price surge could mean the group may deliver more than expected (BBG)
> Despite its warning about an OPEC+ surprise on production, Goldman remains bullish. Stockpiles are “incredibly tight,” and there is a need for prices to move sharply higher, the bank’s analysts said in a Jan. 31 note

Oil traders are juicing their bets on a stronger crude market (Bloomberg)
> The price spreads for Brent from one month to the next is the most bullish in eight years
> Money Managers increased their wagers on comparable U.S. contracts by the most since late-2017 in the week to Jan. 25
> Brent’s month 2 to Month 13 spread is the strongest (most backwardated) since 2013 < Many investors think "backwardation" in the futures market is bearish because they think the NYMEX strip is a "forecast". It is not a forecast at all; futures are "derivatives" that are just where traders can lock in a commodity price in the future today. Think of the NYMEX strip as a wave with the front month being a peak caused by S/D tightness today that will just keep rolling forward. Because of today's S/D tightness and the seasonal spike in oil demand, we can expect the "peak" of the wave to build into the summer.

Natural Gas (a much different market than oil)

The prompt-month natural gas contract is down by 20.5c this morning, near $4.669
> Lower-48 dry gas production is down by 2 Bcf/d, according to early cycle pipeline nominations. Since October, gas production has fallen at the onset of each month < This is normal for Q1 because of winter well "freeze offs".
> Appalachian production is lower, but much of the decline can be attributed to a single EQT pipeline meter. Yesterday, South Central production actually hit a winter 21/22 season-high of 46.75 Bcf/d
> LNG feedgas demand is also down this morning, near 11.6 Bcf/d, its lowest level so far this year
> Flows to Calcasieu Pass are at a new record high of 133 MMcf/d, as the site continues to commission its trains

Double E Pipeline expands Permian Gas deliveries as production ramps up
> The 1.35 Bcf/d Double E Pipeline has begun delivering Permian Basin gas supply to Kinder Morgan's intrastate Gulf Coast Express project
> The pipeline entered the commercial startup phase in November and previously made intrastate deliveries exclusively to Kinder Morgan's Permian Highway Pipeline (PHP)
> Permian gas production has been rising recently and is approaching an all-time record of 14 Bcf/d as producers start to ramp up drilling