Oil & Gas Prices - Feb 11

[dan_s]

AEGIS: "Oil prices will likely rise unless large producers step in to compensate for OPEC+'s struggling members." < This is the BIG Paradigm Shift, which I have been predicting here and in my podcasts for months. OPEC+ is very close (if not already there) to being completely out of spare oil production capacity they can bring to the market. Plus, IEA (as they always do) has been underestimating global demand for oil-based products. So, Supply/Demand is MUCH TIGHTER than investors believe.

Opening Prices:
> WTI is up 105c to $90.93/Bbl, and Brent is up 82c to $92.23/Bbl.
> Natural gas is down 4.6c to $3.913/MMBtu.

AEGIS Notes
Oil

Oil prices are up Friday morning, but down slightly from the seven-year high reached last Friday
> This could be oil’s first weekly loss since mid-December amid progressing nuclear talks between Iran and the U.S.
> A larger-than-expected jump in U.S. inflation that turned the Federal Reserve more hawkish added to overall market bearishness

Global oil prices could continue to rise because of OPEC+’s “chronic” struggle to revive production unless the group’s largest producers compensate, the IEA warned (Bloomberg)
> “The oil market is incredibly tight,” Toril Bosoni, head of the agency’s market and industry division, said in a Bloomberg TV interview
> “These risks, which have broad economic implications, could be reduced if producers in the Middle East with spare capacity were to compensate for those running out,” the agency said < MY TAKE is that OPEC+ actually does not have the ability to bring a lot more production to the market. Team Biden "begging" OPEC+, which includes Russa BTW, is not a strategy that will work.

Natural Gas < A much different market than the global market for oil. Weather is always the primary driver during the winter.

The prompt-month Henry Hub (Mar ’22) is down by 4.6c this morning, near $3.913
> Gas prices have weakened over the last week as weather forecasts have continued to turn bearish for February. The prompt contract is down 65c on the week
> The February gas-weighted heating degree day forecast lost 6 HDDs to 725 HDDs, its lowest mark yet
> Lower-48 dry gas production is pushing higher and is now above 94.8 Bcf/d, a year-to-date high
> The EIA reported a 222-Bcf draw for the week ending February 4, bringing the deficit to the five-year average to 215 Bcf < If this deficit to the 5-year average is still over 200 Bcf at the end of March, it will be bullish for natural gas prices.

The consumer price index (CPI) jumped 7.5% year-over-year, according to the U.S. Bureau of Labor Statistics (BLS)
> The mark was the highest since February 1982 and eighth consecutive month above 5%
> As earnings season has continued, a common theme among oil & gas producers is emerging where companies are speaking about inflation, which is putting upward pressure on both well and operating costs
> The federal reserve is expected to raise interest rates this year, along with central banks around the world, to dampen inflation, which, if left unchecked, would stymie economic growth
> AEGIS notes that the rising inflation and well and operating costs could spill over into prices over the long-term as it drives up the price of finding incremental supply

[dan_s]

USA oil and gas production growth to accelerate. Rigzone.
U.S. oil and gas production growth will accelerate in 2022. That’s according to Enverus Intelligence Research’s latest FundamentalEdge report, which outlined that oil output growth would rise above around 900,000 barrels per day and gas output growth would rise above around four billion cubic feet per day. “For both commodities, we expect this strong U.S. production growth to bring prices down relative to current strip levels, although geopolitical tensions and OPEC outages present upside risk to Brent and WTI,” Enverus Intelligence Research noted in a statement sent to Rigzone.

American shale springs into action to tame runaway oil market. Forbes. Opinion.
Is the U.S. shale sector about to rescue the global oil market as prices spiral toward $100 a barrel? Maybe. Shale producers have a history of surprising market expectations by delivering more production than forecasters saw coming. And the same narrative could be playing out in the U.S. oil sector. Experts have been busy revising U.S. production forecasts for 2022 and 2023 higher in recent weeks after shale companies reported stellar fourth-quarter results and provided updates on their capital expenditure and drilling plans.