Oil & Gas Prices - Feb 16

[dan_s]

AEGIS has a live webinar today focused on the oil & gas markets at 2PM CT. If you don't have the registration link and you'd like to attend the live event, send me an email: dmsteffens@comcast.net

Opening Prices:
> WTI is up $0.47 to $79.06/bbl, and Brent is up $0.33 to $85.71/bbl.
> Natural gas is up 5.6c to $2.527/MMBtu.

AEGIS Notes
Oil

Oil continues to trade range-bound amid optimism for a demand rebound
March ’23 WTI gained 47c this morning to trade above $79/Bbl
Prices came under pressure after yesterday’s bearish EIA report, which included a larger-than-expected build of 16.3 MMBbl
Prices were supported by OPEC and the IEA's bullish demand projections, which cited China's reopening

IEA forecasts that Chinese demand will rise by 0.9 MMBbl/d this year, which is almost half of the global demand growth
Meanwhile, air travel in China recovers following Lunar New Year as the country steadily reopens
The possibility that the Fed may aggressively raise interest rates, which would weaken oil demand, continues to weigh on crude prices

Major oil producers, including Hess Corp and Petronas, lock in hedges to protect against price risk as the latest indication that markets are stabilizing following a volatile year (Bloomberg)
Hess Corp said that the company purchased US crude options contracts for 75,000 Bbl/d at an average monthly floor price of $70/Bbl
Hess, in contrast, doubled the cost of entering the deal last year by spending more than $300 million to unwind parts of its hedge
As recession fears still persist, the return of hedging flows has major consequences for companies that are protected against big price drops
Also, it indicates that the futures market is becoming more liquid, which will increase trading activity and reduce price volatility

Natural Gas

Natural gas prices are up 3% to $2.54
The Summer ’23 strip is up 5c to $2.99, and the Winter ‘23/’24 strip is higher by 3c to $3.91
The EIA will release its weekly natural gas storage report today
The median analyst expectation is for a withdrawal of 109 Bcf, according to the Bloomberg survey
The five-year average withdrawal for this week is 150 Bcf

Comstock Resources (CRK) reduces drilling activity due to low gas prices (BBG)
Comstock said on Wednesday that it would shutter two of its nine gas drilling rigs, as prices have declined by more than 40% this year
The company will continue to operate its remaining seven gas rigs at least through the end of the year and will maintain three fracking crews

A report on drilling activity from data provider Lium has estimated that private gas producers have shut in 25 horizontal drilling rigs since December
lawmakers in California, Oregon, and Washington push back against pipeline expansion (S&P) < As I have posted here several times, I believe the upstream "gassers" will reduce well completions until the natural gas prices move over $3.00. It is not good business to complete high-rate gas wells when gas prices are low. The U.S. natural gas market is HUGE (over 100 Bcfpd) and it will rebalance quickly.

The states have criticized FERCs review of the proposed GTN Xress project, which would modify existing compressor sites and increase capacity on the GTN pipeline system by about 150 MMcf/d
The GTN pipeline transports gas from western Canada into the Pacific Northwest
TC Energy, which operates the pipeline, said, "The strong demand for pipeline capacity in the region, which GTNXP will provide, was reaffirmed when GTN secured long-term agreements with customers for 100% of the project capacity,"

[dan_s]

Closing Prices:
> Prompt-Month WTI (Mar 23) was down $-0.10 on the day, to settle at $78.49
> Prompt-Month Henry Hub (Mar 23) was down $-0.082 on the day, to settle at $2.389

If you missed the AEGIS webinar on 2/16, I will be sending out a link to the replay.
Here are my notes:
Natural Gas
> Q1 dip in gas price due to super warm January and Freeport staying offline. Utilities have no fear of running out of gas in storage.
> U.S. gas market is now about 2 Bcfpd oversupplied.
> Things that could push natural gas prices higher: Colder than normal March in eastern U.S., get Freeport pack online, coal-to-gas fuel switching for power generation, upstream gassers dropping rigs and delaying well completions.
> Big surge in demand coming in 2025.

Crude oil prices:
> All about Russia and China
> Price risk is to the upside
> There is no cushion because we've drained the SPR and OECD petroleum inventories are very low already.
> Diesel inventories are very low. They expect very high diesel prices this summer and maybe rationing.