Oil & Gas Prices - March 21

[dan_s]

Opening Prices:
> WTI is up $4.28 to $108.98/bbl, and Brent is up $4.63 to $112.56/bbl.
> Natural gas is down -7.5c to $4.788/MMBtu.

AEGIS Notes
Oil

Oil surged as Russia’s war on Ukraine has dragged on for a month
> Brent topped $113/Bbl as the European Union will consider a Russian oil embargo this week (Reuters) < I don't see how Europe's economy can survive without Russian oil. If Germany stops taking Russian oil, they will be forced to ration transportation fuel by this summer.
> “Russian supply uncertainty will likely be a familiar theme for the foreseeable future and will keep price volatility at the higher end of the spectrum,” said Stephen Brennock, an analyst at PVM Oil Associates

Yemen’s Houthi rebels attacked at least six sites across Saudi Arabia late Saturday and early Sunday evening (Bloomberg)
> Saudi Arabia’s energy minister said a strike on a refinery in Yanbu caused “a temporary reduction” in production
> The Iranian-backed Houthis have attacked Saudia Arabia on a regular basis over the past two years < The Houthis are funded by Iran, which gives them the missiles to lob into Saudi Arabia. Saudi Arabia will be extremely pissed at the U.S. if Old Joe's team gives $Billions to Iran. The deal on the table shortens the time it will take for Iran to get weapons grade uranium. I really cannot believe our government will allow Iran to get nukes. As Iran gets close to having missiles with nuclear warheads the risk to the world's oil supply will go sky high. We are on a very bad path.

India is willing to take more Russian crude at bargain prices (BBG)
> Hindustan Petroleum Corp. bought 2 MMBbl of the Russian Urals for delivery in June, and other processors are also seeking cargoes, according to Bloomberg
AEGIS notes that consuming nations like India and China are expected to take advantage of cheaper Russian crude, but how much they will be willing or able to take is up for debate

Natural Gas

U.S. gas futures are down this morning, with the prompt contract trading 7.5c lower near $4.788
> U.S. lower-48 dry gas production held above 93 Bcf/d over the weekend, but its still 2 Bcf/d below the 2022 high reached in early February
> U.S. LNG feedgas demand set a new record-high of 13.7 Bcf/d over the weekend, with new records at Sabine Pass and Calcasieu Pass helping push flows higher
> As I mentioned in the podcast, LNG exports should stay at or above 13 Bcf per day all year. When combined with the need to rebuild US natural gas storage levels from over 300 Bcf below normal for this time of year, this is a "Structural Change" in the US gas market. The NYMEX Strip for HH gas is $4.87 (MAY22) to $5.13 (DEC22), which is well above the $4.00/MMBtu price assumption used in my forecast models for Q2 and Q3. All of our gassers (AR, CTRA, CRK, EQT, RRC and SBOW) will have a great year if HH gas remains near the strip.

China LNG imports from Russia doubled in February
> The country imported almost 401k tons from Russia during the month of February < Due to pipeline limits, all of the Russian gas going to Europe can't be redirected to China.
> High prices caused total LNG imports to decline by 8.7% year-over-year in the first two months of 2022, as buyers turned to cheaper domestic coal
> AEGIS notes most of the import deals would have been struck before Russia decided to invade Ukraine on February 24 and that we will see how they have responded to sanctions by the west in the coming weeks

[dan_s]

Closing Prices:
> Prompt-Month WTI (Apr 22) was up $7.42 on the day, to settle at $112.12
> Prompt-Month Henry Hub (Apr 22) was up $0.037 on the day, to settle at $4.900
Both oil and gas moved a bit higher in after-hours trading.

Trading Economics:
"WTI crude futures extended the rally and jumped more than 7% to $112 a barrel on Monday, amid reports that some EU countries would favor a ban on oil imports from Russia. Baltic countries including Lithuania want an oil embargo, while Germany and Italy, which depend on Russian gas, are wary of acting too quickly because of already high energy prices, according to Reuters. Meanwhile, the Ukraine conflict showed little signs of easing with Ukraine resisting heavy Russian attacks and refusing to surrender the city of Mariupol. Also, attacks by the Houthi group (Yemen) caused a temporary fall in output at a Saudi Aramco. Last month, OPEC+ missed its production target by more than 1 million barrels per day in February as an already tight market braces for major Russian disruption."


MY TAKE:
> There is no sign that Russia is going to give up on takeover of Ukraine.
> Europe is totally screwed as their economies will crater without Russian oil and gas, thanks in part to The Green Bad Deal.
> OPEC+ is basically tapped out of spare oil capacity they can bring to market. The OPEC cartel cannot make up for several million bpd of Russian oil.
> Iran is using the Yemen Houthi Group to ramp up their war on Saudi Arabia. Team Biden cannot chew gum and walk at the same time, so they have no fear of U.S. responding to their attacks on Saudi Arabia.