Oil & Gas Prices - Nov 8

[dan_s]

Opening Prices:
> WTI is down $0.41 to $91.38/bbl, and Brent is down $0.18 to $97.74/bbl.
> Natural gas is down -45.4c to $6.49/MMBtu.

AEGIS Notes
Oil

Oil trades marginally lower this morning
WTI is trading above $90/Bbl amid concerns about weaker demand
China’s southern manufacturing hub Guangzhou had the biggest Covid outbreak on Monday since May
Total new cases reached their highest level (7,475) since April, and varying levels of restrictions are still in effect in Shanghai, Wuhan, and other cities
It is unclear how long China will maintain its Covid-zero policy; its strict COVID restrictions continue to have an adverse impact on oil demand

China adds new refinery capacity amid global refining shortage (Reuters)
In Guangdong, PetroChina began testing production at a 200 MBbl/d crude facility
Shenghong Petrochemical is preparing to launch its 320 MBbl/d plant in Jiangsu province after being delayed due to the pandemic
Global refinery capacity has proved unable to keep up with growth in fuel demand as a result of the manufacturing and freight-led recovery after the pandemic
MY TAKE: China has smarter leaders than we do. They know that fossil fuels will be the #1 source of energy for many more decades. Our leaders allow Climate Change Wackos to set our energy policy

Natural Gas

Natural gas prices are down 7% in the prompt month, following yesterday’s 12% rally
While prices are down in the prompt month, the Summer ’23 and Winter ‘23/’24 strips are flat from yesterday

Weather forecasts cooled further today for most of the lower-48 except for the Rockies and Western regions
The forecast for the Northeast fell by 13 degrees from yesterday’s forecast over the 1-15 day period, while the Southeast regions forecast fell 25 degrees from yesterday’s forecast over the same time period

UK to finalize LNG deal with US (Reuters)
Prime Minister Rishi Sunak is expected to announce a major gas supply deal with the US following the COP27 climate summit, as discussions are in the final stage
The UK wants to secure the supply of 353 Bcf of gas over the next year, while earlier this year, the US agreed to supply the EU with 530 Bcf
The amount of gas the US can supply the UK with, however, will be dependent on US export capacity, which is expected to average 11.75 Bcf/d in the fourth quarter of 2022
The return of Freeport LNG this winter should increase the current export capacity by 2.1 Bcf/d
Long-term supply deals such as this one should keep the demand for US LNG high over the coming years and support the buildout of gas export infrastructure in the US
By 2027 US LNG export capacity will top 20 Bcf per day and pipelines to Mexico and Canada will add another 8-10 Bcf per day of export capacity.

[dan_s]

Go here https://weather.com/maps/tendayforecast

Scroll through the 10-Day forecast map of the U.S. and you will see that the weather turns very bullish for natural gas demand after Friday, November 11.

Storage builds for the weeks ending Nov 4 and Nov 11 should be larger than the 5-year average, but then the draws for the last two weeks of November should be much larger than the 5-year average.

It will be a Roller Coaster ride for natural gas prices, but if storage is ~200 Bcf below the 5-year average on December 30th, each significant winter storm in Q1 has the potential to cause a big spike in ngas prices. Miss La Nina and Old Man Winter are now in charge of natural gas prices.

[dan_s]

Closing Prices:
> Prompt-Month WTI (Dec 22) was down $-2.88 on the day, to settle at $88.91
> Prompt-Month Henry Hub (Dec 22) was down $-0.806 on the day, to settle at $6.138

The year of the Roller Coaster continues. Except for more Covid Cases in China, there is not much that explains the pullback today. Maybe it is just the day traders being more focused on the midterms.

[uberCOAT]

What's going on with Freeport. Does not appear they even filed yet to restart?