Oil & Gas Prices - Nov 11

[dan_s]

The Year of the Roller Coaster continues as the "noise" impacting oil traders isn't letting up. What happens when the SPR draws end???

Opening Prices:
> WTI is up $2.75 to $89.22/bbl, and Brent is up $2.68 to $96.35/bbl.
> Natural gas is up 5.8c to $6.297/MMBtu.

AEGIS Notes
Oil

Oil heads for another weekly loss despite an early price spike
WTI rose by more than 3% this morning to trade near $89
The USD Index (DXY – a proxy for U.S. Dollar strength against a basket of six international currencies) fell more than 3% this week to the lowest since August
A weaker dollar (DXY Index) can cause foreign buyers of dollar-denominated commodities to pay less for the same amount of goods

China announced that it’s planning on easing its Covid restrictions (BBG)
China announced that it would reduce the quarantine period that travelers and people who have been in close contact with infected people must spend
The nation also plans to scrap the system that penalizes airlines for bringing new virus cases into the nation
Lockdowns have hampered China's fuel demand this year, and the pace of reopening will be a key factor in deciding the demand rebound
Despite the strict Covid strategy, daily cases have climbed to the highest since April
Many analysts doubt that the nation will reopen rapidly, but if China's Covid-zero policies are broadly relaxed, it would be bullish for crude demand

In a time when the market is speculating sanctions on Russian supply, a full reopening of China may increase oil demand by about 0.5 MMBbl/d, said Saul Kavonic, an analyst at Credit Suisse Group
However, concerns that China would continue to impose COVID lockdowns along with bearish U.S. inventory data continues to put pressure on oil prices

Saudi Arabia’s energy minister Prince Abdulaziz said that OPEC+ would continue to be cautious about oil production and that "it's about being responsible... not losing sight" of what the market requires (BBG)
The 23-nation coalition, led by Riyadh and Russia, is set to meet on December 4 to determine whether to reduce output once again, keep it stable, or turn around and pump more
Speaking about China, Prince Abdulaziz stated, "The jury is still out, and the Chinese authorities are saying they are going to continue to be strict and diligent and follow the same regimentation that they have"

Natural Gas

Natural gas prices are up 2.5% this morning but down 8% on the week

Yesterday the EIA reported a storage build of 79 Bcf, which fell within the survey range of 66-101 Bcf
This most recent injection has left storage only 73 Bcf below the five-year average inventory level, which is a relatively normal level and should keep fears of a supply shortage muted, barring extreme cold

Williams company asks FERC to approve Regional Energy Access expansion (Reuters)
The US energy company is urging federal regulators to approve the expansion of the Transcontinental gas pipeline to ensure adequate supplies to Pennsylvania, New Jersey, and Maryland
Williams said that if FERC does not approve the project by November 30, the company may not be able to meet construction windows established to protect endangered species
Midstream companies have had difficulty building pipeline projects in the US Northeast, mostly due to state opposition and permits being held up in courts. Keep electing Climate Change Wachos and your utility bills will keep going higher and risk of power outages will increase.


German meteorological office says winter could be mild (Reuters) < Wishful thinking or just an attempt to reduce fear?
The latest outlook from the German meteorological office says that a mild winter is more likely, with their model forecasting this winter to be in the 33% of mildest winters since 1991
There have been concerns over a potential cold winter in Europe due to the lack of Russian gas flows into the region, however, storage has filled to capacity, and weather so far has been warmer than average, assuaging fears

[Cliff_N]

I take the dip in NG post EIA report is the build in NG, correct?

[SergioSays]

I believe the big NG dip is from a twitter rumor that Freeport has pipe damage which will delay a partial startup to mid Dec, with full capacity ramp delayed until at least Feb. The author deleted the tweet but the damage has been done.

[dan_s]

Trading Economics:
"US natural gas futures are set to close a volatile week 9% lower at around $5.8/MMBtu, the lowest since early November, as temperatures are set to remain higher than usual until the end of the month. Also, rumors that the Freeport LNG export plant may not return to service until December spooked investors away. Freeport has been saying it will resume service in November, after being offline since June, but has not yet submitted a request to federal safety regulators. Average US gas demand, including exports, is expected to rise to 119.9 bcfd next week from 98.2 bcfd this week. At the same time, average gas output in the US Lower 48 states is down to 98.6 bcfd so far in November, from a record 99.4 bcfd in October. Elsewhere, the latest EIA data showed US utilities added 79 bcf of gas to storage last week, below market expectations of an 84 bcf increase and compared with an increase of 15 bcf in the same week last year."

There is lots of noise impacting both oil and gas prices, but weather is by far the primary driver of natural gas demand and the price. A polar vortex that pushes temps down to zero in the NE quarter of the US can send demand for gas over 150 Bcf per day. We should see a much higher than normal draw from storage for the week ending Nov 18.

On any given day it is the Paper Traders that set the price of oil and gas futures contracts.

[dan_s]

This website is very helpful to me in understanding weather related demand for natural gas. Make it a favorite website and get in the habit of checking it each day for about ten minutes.

https://www.celsiusenergy.net/p/intraday-weather.html

[dan_s]

Closing Prices:
> Prompt-Month WTI (Dec 22) was up $2.49 on the day, to settle at $88.96
> Prompt-Month Henry Hub (Dec 22) was down $-0.360 on the day, to settle at $5.879

[uberCOAT]

Upcoming weather forecast looks snowy and cold

https://www.youtube.com/watch?v=ms-ugd-ZRto