Oil & Gas Prices - Mar 4

[dan_s]

Opening Prices:
> WTI is up $3.49 to $111.16/bbl, and Brent is up $3.28 to $113.74/bbl.
> Natural gas is up 12.4c to $4.846/MMBtu.

AEGIS Notes
Oil

WTI oil futures were up 5% Friday morning, continuing to exhibit high volatility
> The Brent crude contract has traded in the biggest range since the launch of the futures contract in 1988 (Bloomberg)
> Commodity prices were nudged higher Friday morning after Ukrainian officials said Russian forces attacked a nuclear plant

JPMorgan said yesterday that Brent could end the year at $185/Bbl if Russian supply continues to be disrupted (Reuters)
> Currently, 66% of Russian oil is having difficulty finding buyers, JPM analysts, including Natasha Kaneva said in the note
> In the near term, the scale of the supply disruption is so large that oil prices need to reach and stay at $120/Bbl for months to incentivize demand destruction, the analysts said. The outlook assumes no immediate return of Iranian barrels.

MY TAKE: Even if Team Biden is dumb enough to drain the SPR and send $Billions to Iran (I heard yesterday that Iran will get $11 Billion from us), it will not lower the price of gasoline. If the conflict in Ukraine drags on it will push WTI over $150/bbl by the end of June. Oil demand is "seasonal" and OECD petroleum inventories are too low to get the world through the summer.

Natural Gas

Natural gas prices are up this morning, with the prompt contract trading 12.4c higher, near $4.846
> LNG feedgas demand has been steady, near 12.5 Bcf/d for the last several days

The EIA reported a draw of 139 Bcf for the week ending February 25
> The draw on stocks comes amid an impressive recovery in production that offset by low wind-powered electricity generation < A reminder that we cannot and should not rely on wind and solar for a high percentage of our electricity.
> The draw brought inventories to 1,643 Bcf, which is 255 Bcf, or 13.4% below the five-year average
> The ICE end-of-season inventory number, a proxy for where traders see inventory levels heading into summer, settled at 1,390 Bcf

Asian liquefied natural gas (LNG) spot prices touch a new record-high
> Asian gas prices have been taking the lead from TTF prices, with the spot Japan-Korea Marker (JKM) spot price surging to a high of $59/MMBtu
> The prompt-month Dutch Title-Transfer Facility price hit an intra-day high of $64.50/MMBtu during yesterday’s trading session
> Prices for spot cargoes delivered during the same period last year were trading near $6/MMBtu

MY TAKE: LNG prices over $50/MMBtu are insane for this time of year. With US gas in storage now sure to start the refill season by at least 200 Bcf below the five year average and demand for US LNG now sure to remain high all year, I think we should see HH prices average more than $4.50/mcf and likely go a lot higher. Add more "gassers" to your portfolio.

[dan_s]

This is why oil is now likely to go over $150/bbl.

Russia's 2021 oil output was around 10.2 million barrels per day and is expected to rise another 5% this year to roughly 11 million barrels per day, making it the second largest oil producer in the world.
Russia is also among the world’s biggest natural gas producers as well, with output reaching a 15-year high in 2021 around 514 billion cubic meters.

Team Biden is going to show the world how tough they are by putting more sanctions on Russia and making it hard to sell their oil. I agree that something must be done, but this world is now "short oil" and we are heading full speed into an Energy Crisis. The West needs Russia's oil and gas and Putin knows it.

[uberCOAT]

How do you see Natural Gas Prices in the US playing out with the Russia/Ukraine situation. Its not like we can increase LNG exports..as we are pretty much maxed out currently.

[dan_s]

Three things should keep natural gas prices high in the US.
> Need to rebuild U.S. natural gas storage levels before the beginning of the next winter. Refilling storage is not "optional".
> Demand for U.S. LNG will keep exports near capacity all year.
> Rebound in industrial demand for natural gas in the U.S.. Industrial demand is larger than space heating demand, especially in "Post-Pandemic World".

Watch this video:
https://www.msn.com/en-us/money/news/oi ... d=msedgntp

High oil prices do impact natural gas prices. Six mcf of natural gas has about the same energy as one barrel of oil, so any company that can switch to natural gas from oil will do so. The U.S. natural gas market is growing at a much faster rate than demand for oil within the U.S.

Plus, inflation is going to impact all commodity prices.

[dan_s]

Closing Prices:
> Prompt-Month Henry Hub (Apr 22) was up $0.294 on the day, to settle at $5.016
> Prompt-Month WTI (Apr 22) was up $8.01 on the day, to settle at $115.68

[mikelp]

even Elon Musk gets it
he calls for increasing U.S. oil & gas production immediately:

“Hate to say it, but we need to increase oil & gas output immediately,” Musk tweeted Friday. “Extraordinary times demand extraordinary measures,” he said.

[dan_s]

Even Mr. Musk knows that wind, solar and EVs are not going to reduce demand for oil-based fuels and materials. It takes a lot of oil to build a Tesla.