Opening Prices:
> WTI is up $0.61 to $117.48/bbl, and Brent is up $0.71 to $118.32/bbl.
> Natural gas is up 13.6c to $8.621/MMBtu.
AEGIS Notes
Oil
OPEC+ agreed to 648 MBbl/d output increases in July and August, advancing their production targets for the year, despite some members struggling to achieve quotas
> The cartel divided the hike among its members, including Russia, whose output is declining due to sanctions and some buyers avoiding its oil due to the invasion of Ukraine, implying that the boost will fall short
> AEGIS notes that OPEC+ is still likely to supply far less oil to the market than agreed, failing to provide the much-needed respite < This is KEY and something that Team Biden seems not to understand. OPEC+'s official quotas are now meaningless because the cartel can't produce that much oil. OPEC+ actual production has been less than the quotas for seven straight months. Over a million bpd below in May. OPEC+ cannot save us from the stupidity of Team Biden.
The European Union approved a sixth set of sanctions, including a partial ban on Russian oil imports after Hungary waived concerns that were holding up the process for weeks
> The move bans Russian seaborne oil purchases in the next six months and petroleum products in the next eight months
> Pipeline crude will be temporarily exempted as a concession to Hungary and other landlocked countries that heavily rely on Russia's supply through the Druzhba pipeline
Natural Gas
The EIA reported a 90 Bcf injection into storage Thursday, for the week ended May 27
> This was slightly higher than the average Bloomberg analysts survey of 86 Bcf
> The build was a surprise to the bearish side but was still below last year’s 100 Bcf injection for the same corresponding week
> Total inventory levels rose to 1.902 Tcf, while the deficit to the five-year average expanded to 337 Bcf < Each week that passes without reducing the deficit to the 5-year average makes it more likely that the U.S. utilities will not have enough gas in storage to make it through the 2022/2023 winter. The "Bidding War" for physical supply will get serious in a few months.
Local gas prices in the Permian continue to come under pressure
> In particular, the Winter ‘23/’24 strip has neared -$1.20 to Henry Hub
> The same basis strip was recently trading near -$0.60 about three weeks ago following a flurry of midstream announcements promising extra pipeline takeaway capacity. < I will take this into consideration as I update my forecast/valuation models. Note that five of our six gassers don't produce gas in the Permian Basin (AR, CRK, EQT, RRC and SBOW). CTRA has some exposure to the Permian differential, but most of their gas comes from the Appalachian Basin (Marcellus/Utica).
Oil & Gas Prices - June 3
Oil & Gas Prices - June 3
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - June 3
Natural-gas prices will stay high as demand outpaces supply. Barron's.
Natural-gas prices could jump by 15% or more by year end as supplies fall far short of demand, experts say. “Increasing supply is now getting trickier, and we really don’t see much of a jump until this time next year,” says Peter McNally, an energy expert at Third Bridge. Shortages of equipment and personnel, combined with underinvestment in the sector, will probably lead the price to rally to $10—or about 15% more than recent futures prices. However, McNally says that some U.S. regions may see temporary spikes to $30 due to lack of infrastructure.
Regional Price Spikes: The gassers in our Sweet 16 (AR, CRK, CTRA, EQT and RRC) all have outstanding marketing teams and they have some undedicated gas which they can move to take advantage of gas price spikes. Utilities MUST keep the pressure up in residential distribution networks that bring gas to your home. They will pay whatever it takes in the spot market to get physical supply. I've seen some regions, especially in the Northeast, where spot prices for natural gas have gone over $100/Mmbtu.
Natural-gas prices could jump by 15% or more by year end as supplies fall far short of demand, experts say. “Increasing supply is now getting trickier, and we really don’t see much of a jump until this time next year,” says Peter McNally, an energy expert at Third Bridge. Shortages of equipment and personnel, combined with underinvestment in the sector, will probably lead the price to rally to $10—or about 15% more than recent futures prices. However, McNally says that some U.S. regions may see temporary spikes to $30 due to lack of infrastructure.
Regional Price Spikes: The gassers in our Sweet 16 (AR, CRK, CTRA, EQT and RRC) all have outstanding marketing teams and they have some undedicated gas which they can move to take advantage of gas price spikes. Utilities MUST keep the pressure up in residential distribution networks that bring gas to your home. They will pay whatever it takes in the spot market to get physical supply. I've seen some regions, especially in the Northeast, where spot prices for natural gas have gone over $100/Mmbtu.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - June 3
"Pipeline crude will be temporarily exempted as a concession to Hungary and other landlocked countries that heavily rely on Russia's supply through the Druzhba pipeline."
the Druzhba pipeline passes through western Ukraine, and crosses the border with Slovakia/Hungary close to city of Uzhhorod in Zakarpattia Oblast, Ukraine. Note that Russia has not attacked Zakarpattia Oblast with any missile attacks yet in the war, but the history of the region is complicated.
Short version. Transcarpathia (Zakarpattia) was part of the Austro-Hungarian Empire for up to 1,000 years, up to WW-I. After WW-I, it was assigned by Treaty to Czechoslovakia ...until WW-II when Hungary took control of the majority of the region, until the German Army decided to take control in 1944, for a brief time until Stalin's army pushed west. The Soviet Union gained control after WW-II, where it became part of Ukraine, USSR.
Transcarpathia still has a large Hungarian ethnic community, which at times has been under suspicion for "separatist" leanings. Additionally, Victor Orban has a 'friendly' relationship with Putin that is not to be dismissed, and it's doubtful that Orban will ever agree to shutting off the flow of Russian pipeline oil into Hungary. Stay tuned.
https://www.theglobeandmail.com/world/a ... uspicions/
the Druzhba pipeline passes through western Ukraine, and crosses the border with Slovakia/Hungary close to city of Uzhhorod in Zakarpattia Oblast, Ukraine. Note that Russia has not attacked Zakarpattia Oblast with any missile attacks yet in the war, but the history of the region is complicated.
Short version. Transcarpathia (Zakarpattia) was part of the Austro-Hungarian Empire for up to 1,000 years, up to WW-I. After WW-I, it was assigned by Treaty to Czechoslovakia ...until WW-II when Hungary took control of the majority of the region, until the German Army decided to take control in 1944, for a brief time until Stalin's army pushed west. The Soviet Union gained control after WW-II, where it became part of Ukraine, USSR.
Transcarpathia still has a large Hungarian ethnic community, which at times has been under suspicion for "separatist" leanings. Additionally, Victor Orban has a 'friendly' relationship with Putin that is not to be dismissed, and it's doubtful that Orban will ever agree to shutting off the flow of Russian pipeline oil into Hungary. Stay tuned.
https://www.theglobeandmail.com/world/a ... uspicions/
Re: Oil & Gas Prices - June 3
Trading Economics:
"WTI crude futures rallied to above the $119-per-barrel mark on Friday and were set for a sixth weekly advance after a keenly anticipated OPEC+ meeting delivered only a modest increase in output. The cartel group decided to increase production by 648,000 barrels per day in July and August instead of the previously agreed 432,000 bpd, which was seen as insufficient to compensate for Russia's lost supply. Russian output dropped by 1 million bpd since its invasion of Ukraine and is likely to fall even further as the EU's ban on Russian oil kicks in. On top of that, EIA data showed a higher-than-expected 5.1 million barrels draw in US crude inventories last week, the biggest in six weeks."
MY TAKE: OPEC+ is now totally out of spare capacity and the oil traders know that the last time that happened WTI went over $140/bbl.
"WTI crude futures rallied to above the $119-per-barrel mark on Friday and were set for a sixth weekly advance after a keenly anticipated OPEC+ meeting delivered only a modest increase in output. The cartel group decided to increase production by 648,000 barrels per day in July and August instead of the previously agreed 432,000 bpd, which was seen as insufficient to compensate for Russia's lost supply. Russian output dropped by 1 million bpd since its invasion of Ukraine and is likely to fall even further as the EU's ban on Russian oil kicks in. On top of that, EIA data showed a higher-than-expected 5.1 million barrels draw in US crude inventories last week, the biggest in six weeks."
MY TAKE: OPEC+ is now totally out of spare capacity and the oil traders know that the last time that happened WTI went over $140/bbl.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - June 3
Closing Prices:
> Prompt-Month WTI (Jul 22) was up $2.00 on the day, to settle at $118.87
> Prompt-Month Henry Hub (Jul 22) was up $0.038 on the day, to settle at $8.523
It is looking more and more like Goldman Sachs' forecast of $135/bbl Brent in Q3 is going to happen. U.S. and OECD petroleum inventories continue to fall.
> Prompt-Month WTI (Jul 22) was up $2.00 on the day, to settle at $118.87
> Prompt-Month Henry Hub (Jul 22) was up $0.038 on the day, to settle at $8.523
It is looking more and more like Goldman Sachs' forecast of $135/bbl Brent in Q3 is going to happen. U.S. and OECD petroleum inventories continue to fall.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group