Oil & Gas Prices - Feb 21

[dan_s]

Opening Prices:
> WTI is up $0.63 to $76.97/bbl, and Brent is up $0.45 to $83.45/bbl.
> Natural gas is down -11.3c to $2.162/MMBtu.

AEGIS Notes
Oil

Oil rises after a weekly loss on hopes of a Chinese demand recovery
March ’23 gained 63c this morning to trade around $77/Bbl
Market juggles between lingering concerns about a global economic slowdown and optimism for China's reopening
China has increased purchases of discounted Russian crude and fuel oil
The market will be closely monitoring the Fed minutes slated for release tomorrow, a further indication of how the Fed might proceed with tightening monetary policy

Russian oil exports to China surged to the highest since the Ukraine invasion (BBG)
Russia’s overall crude and fuel oil exports to China reached 1.66 MMBbl/d last month (surpassing previous high from April 2020), according to Kpler
Currently, the nation competes with India to be the biggest consumer of discounted Russian crude
The rise in Chinese buying indicates that the nation's economic recovery is accelerating, which should support global oil demand
Additionally, Chinese refiners have also increased their purchases of US cargoes, and companies like Unipec and PetroChina Co. have hired at least ten supertankers to transport cargo from the US starting in March

Russian crude production cut plan so far decided only for March (Reuters)
Deputy Prime Minister Alexander Novak said on Tuesday that a 0.5 MMBbl/d cut in Russian oil production announced last month would initially only apply to March output
"We will watch how the situation on the market develops, and decisions... will be made from this. Now, the decision is for March," said Novak
According to Novak, the cut will be based on January's output levels. He said that last month's production was 9.8 to 9.9 MMBbl/d

Natural Gas

Natural gas prices are down nearly 4%, trading around $2.16
The Summer ’23 strip is down 3.4c to $2.68, and the Winter ‘23/’24 strip is down 3.1c to $3.68
Weather forecasts have shifted materially warmer, with the Lower 48 forecast warming by 14.4 °F in the 6-10 day period
The Midwest forecast warmed by 29.5 °F and the South Central forecast warmed by 34.4 °F, both in the 6-10 day period

Europe to receive the first LNG cargo from Freeport since explosion (BBG)
A vessel operated by Germany’s Uniper SE loaded cargo on February 14 and is scheduled to deliver the gas to the Wilhelmshaven import terminal in Germany
Four vessels have now departed the facility since authorization was given by regulators to begin loading cargoes
Gas flows into the Freeport LNG facility have been steady at 468 MMcf/d for the past week as the facility ramps up to its full capacity of 2.1 Bcf/d

Europe set to end winter with near record levels of gas in storage (Reuters)
Gas inventories are 55% higher than the seasonal average, according to Gas Infrastructure Europe
Mild weather, record LNG imports, and industrial curtailments have helped build inventories
Prices at the Dutch TTF hub have fallen considerably from their record high seen in August 2022, which could encourage more demand in 2023
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MY TAKE: Today's natural gas price (the MAR23 NYMEX futures contract) is a classic example of "Sellers outnumbering Buyers". The most extreme example was the APR20 WTI futures contract (beginning of the Covid 19 fear mongering) that actually went negative when the paper traders had to pay refiners to take their long contracts. The current situation for natural gas is that the paper traders jumped into Q1 2023 HH gas contracts when we had the very cold weather in December. Since the paper traders cannot take physical delivery of the gas, they MUST close out their long positions. With the utilities out of the futures market, knowing they have enough gas in storage to make it to April, the paper traders are screwed. This situation should begin to be resolved as we move into the natural gas refill season. Today's natural gas price is not the "Right Price" for U.S. natural gas.

[dan_s]

Trading Economics:
"WTI crude futures fell below the $77 per barrel mark on Tuesday as lingering concerns about a recession-driven demand downturn offset prospects of tighter global supplies. Hotter-than-expected US economic data fanned concerns of more Federal Reserve interest rate hikes that could weigh on demand at a time when inventories continue to rise. Keeping a floor under prices, Russia has recently announced its plans to cut output by 500,000 barrels a day in March, 5% of total production, a retaliation against the European ban on seaborne imports and price caps for Russian oil products. At the same time, the IEA and OPEC raised their forecast for 2023 oil demand growth, citing higher consumption from China."

All of the fundamentals above point to an under-supplied oil market by this summer, but the FEAR of the Fed raising interest rates seems to overshadow everything else. Just remember that "FEAR" seldom ends up being as bad as people think. Part of the reason is that the 24/7 news channels beat everything to death.

[dan_s]

Closing Prices:
> Prompt-Month WTI (Mar 23) was down $-0.18 on the day, to settle at $76.16
> Prompt-Month Henry Hub (Mar 23) was down $-0.202 on the day, to settle at $2.073