Oil & Gas Prices - March 24

[dan_s]

I will be opening today's webinar with a brief update on why I think oil and gas prices will stay high all year and probably for several year.

Opening Prices:
> WTI is down $0.13 to $114.80/bbl, and Brent is down $0.01 to $121.59/bbl.
> Natural gas is down -3.8c to $5.194/MMBtu.

AEGIS Notes
Oil

West Texas Intermediate was mostly unchanged Thursday morning as NATO members gather in Brussels
> The White House and the EU are close to a deal aimed at reducing the region’s dependence on Russian energy (BBG)
> Many buyers are shunning Russian crude, but Asian consumers may be ramping up to take barrels at steep discounts

National security advisor, Jake Sullivan, said that an agreement would be announced as soon as Friday
> The agreement will target gas supplies more than oil
> It’s intended to ensure supplies of American natural gas and hydrogen for Europe
> “You can expect that the U.S. will look for ways to increase LNG supplies, surge LNG supplies, not just over the course of years, but over the course of months as well,” Sullivan said

China’s oil refineries are discreetly purchasing cheap Russian crude (Bloomberg)
> Traders say China’s state processors are negotiating privately under the radar with sellers < Iran?
> AEGIS notes that the actual quantity of Russian oil countries like China and India are willing to take will be important as the globe is experiencing supply shocks

Natural Gas

U.S. gas futures are flat this morning, with the prompt contract trading near $5.194
> The EIA is expected to report a withdrawal of 59 for the week ending March 18, according to Bloomberg
> Bloomberg survey estimates ranged from 42 Bcf to 64 Bcf
> The five-year average pull for the corresponding week was 62-Bcf, while last year’s withdrawal was at 29 Bcf
> If a 59-Bcf withdrawal is reported, total stocks will drop to 1,381 Bcf < Based on the current 10-day weather forecast for the U.S., I think we should see at least two more weekly draws that add up to more than 80 Bcf. The 5-year average storage level at the beginning of the refill season is 1,662 Bcf. Starting the refill season 360 Bcf below the 5-year average would be extremely bullish for ngas prices.

Japan rebuffs Russian LNG cargoes, requesting gas from elsewhere
> A Japanese regional utility released a tender to purchase a shipment of liquefied natural gas with a clause requesting that the cargo not come from Russia
> This marks the first LNG tender specifically refusing to take cargoes from Russia
> If more buyers across the region repeat the move, already-high gas prices could rise even further if Russian LNG cant find a home

[dan_s]

Closing Prices:
> Prompt-Month WTI (May 22) was down $-2.59 on the day, to settle at $112.34
> Prompt-Month Henry Hub (Apr 22) was up $0.169 on the day, to settle at $5.401 < A year ago HH natural gas was $2.50/MMBtu. Based on my SWAG, the next 3 ngas storage reports for the period ending April 8 could be total draws from storage of 90 Bcf. That compares to the 5-year average for the same three weeks of a build of 36 Bcf. If my Wild Ass Guess is close to what transpires, we could see the MAY22 NYMEX contract for HH ngas go over $6/MMBtu.

Why might this happen? This is a La Nina Winter. They typically result in much colder weather extending into mid-April.

Keep an eye on the 10-day forecast for Chicago. Chicago is the Bulls Eye for natural gas for space heating. As long as overnight lows in Chicago are below 40F there will be a draw from storage for that day. Chicago overnight lows below freezing are at least 20 Bcf draws per day. Note that for the week ending March 18, actually mild in Chicago, we had a draw of 51 Bcf from storage.

Check this out: https://www.wunderground.com/forecast/u ... .88,-87.63