Oil & Gas Prices - Mar 7

[dan_s]

Opening Prices:
> WTI is down $0.37 to $80.09/bbl, and Brent is down $0.39 to $85.79/bbl.
> Natural gas is up 5.1c to $2.623/MMBtu.

Closing Prices:
> Prompt-Month WTI (Apr 23) was down $-2.88 on the day, to settle at $77.58 < Blame it on the Fed, which seems hell bent to raising interest rates to push the U.S. into a recession.
> Prompt-Month Henry Hub (Apr 23) was up $0.115 on the day, to settle at $2.687



AEGIS Notes with my comments in blue
Oil

Oil reverses some of yesterday’s gains ahead of Fed Chair Powell’s testimony
April ’23 WTI lost 37c this morning to trade around $80/Bbl
The market will be closely watching Fed Chair Powell's remarks today for indications about Fed's future rate-hike plans
The market also continues to monitor Russian supply issues brought on by sanctions and subsequent production cuts
Russia's seaborne crude exports fell by 14% to 3.1 MMBbl/d last week, while Kazakhstan was unable to supply enough crude to EU nations eager to replace Russian barrels (BBG) < Without Russian oil, OPEC+ will not be able to export oil up to their official quotas.

Additionally, the U.S. Dollar strengthened relative to its recent lows, further adding pressure on crude prices

Kazakhstan has reportedly had trouble finding spare barrels to meet rising demand in Europe as nations attempt to replace Russian barrels (BBG)
This quarter, Germany is scheduled to receive 40,000 tons (0.3 MMBbl) of Kazakh crude via the Druzhba pipeline system, roughly 90% less than originally planned, according to KazTransOil, the state oil pipeline operator
Meanwhile, Russian seaborne crude exports last week declined 14% week-over-week to 3.1 MMBbl/d
Flows from the Pacific ports were significantly lower, while those from the Baltic and Black Sea ports were unchanged from the previous week
It seems unlikely that the decline is due to the retaliatory 0.5 MMBbl/d production cut for March
The country's western ports, where cargoes are being offered at a 25% discount to those shipped from the Pacific, are where any retaliatory cut in flows is most likely to be seen

Natural Gas

Natural gas prices are up about 2.5% in the prompt month to $2.62
Natural gas fell 52c yesterday after weather models shifted significantly warmer over the weekend
Weather forecasts are mostly unchanged from yesterday and continue to forecast a slightly cooler-than-normal March

Regulators request additional information from Freeport LNG (Reuters)
FERC has sent Freeport a list of questions to be answered while they evaluate the company’s request to restart full commercial operations
According to the FERCs letter to Freeport, regulators are seeking an update on the company’s hiring efforts to address operator fatigue
A spokesperson for Freeport said, “In collaboration with the regulatory agencies, we are continuing to progress the safe restart of our liquefaction facility,” < Our government is now run by idiots that just need to get out of the way. How about focusing on fixing the railroad infrastructure?
Early nominations show the export plant taking 1.4 Bcf/d as of this morning

Chesapeake signs LNG supply deal with Gunvor (Reuters)
Chesapeake Energy said on Monday that beginning in 2027, they will provide 0.27 Bcf/d of gas to commodity trader Gunvor for 15 years
The US-sourced gas will be liquefied at a facility chosen by the firms and will be priced on the Japan-Korea Marker benchmark

[ChuckGeb]

I don't think the regulators are idiots. They are at war with fossil fuels and right now are in control and exercising it to the detriment of our country and economy.

[dan_s]

High IQs and common sense are not the same thing. We may have a lot of ivy league grads in Washington, but they are messing with the oil & gas sector without realizing how important it is to the American standard of living. Labeling them as "idiots" may be too kind.

[dan_s]

Blame it on the Fed
Trading Economics:
"WTI crude futures plunged more than 2% to around $78 per barrel on Tuesday, as hawkish remarks from Federal Reserve Chair Jerome Powell triggered a selloff across riskier assets amid lingering concerns that tightening financial conditions will drag the US into a recession. The US benchmark was already under pressure earlier this session as China's decision to set a lower-than-expected economic growth and customs data showing a decline in crude imports during January and February fueled speculation that the reopening of the world's second-largest oil consumer could not spur demand as initially thought. Meanwhile, keeping a lid on prices, Chevron Chief Executive Mike Wirth said at a conference in Houston that the world is now more vulnerable to any unexpected supply disruption as a squeeze on Russian energy flows came at a time of limited oil inventories and supply swings."

Blame it on the Weather Man
"US natural gas futures traded around a 1-week low of $2.6/MMBtu, following a 14.5% slump in the previous session, which was the biggest daily decline since December 14, on expectations of lower demand in the next two weeks after forecasts pointed to milder weather. The US natural gas prices have been volatile in the last few sessions with the benchmark jumping 18% last week to a 5-week high of $3/MMBtu due to a surge in LNG shipments as the Freeport export plant returned to service after the fire-related shutdown in June 2022. The total amount of gas flowing to US LNG export plants increased to 13.7 bcfd so far in March from 12.8 bcfd in February, compared with a monthly record of 12.9 bcfd in March 2022. Meanwhile, average US gas demand, including exports, is expected to rise to 120.7 bcfd next week from 116.7 bcfd this week, well below Refinitiv's outlook on Friday."

MY TAKE on the U.S. Natural Gas Market:
Here is what will get natural gas prices firmly over $3.00/mcf
> Getting Freeport up to maximum LNG export capacity is important, but weather is still the primary driver of ngas prices.
> This week's ngas storage report should be a draw close to the 5-year average draw of 96 Bcf.
> Then we should see 3 weekly draws well above the 5-year averages of 48, 47 and 4 Bcf.
> On Feb 24 ngas in storage was 342 Bcf above the 5-year average.
> If we do have a colder than normal March in the Northeast, at the end of March storage should be less than 250 Bcf above the 5-year average.
> This is definitely not a "GLUT" of gas in a market that goes through close to 37 Tcf of gas per year.
> If the first half of April is colder than normal (maybe too much to ask for), we could see storage back near the 5-year average by the end of April. The MJO is currently in a phase that could cause winter weather to hang around into mid-April. I have no idea what controls the MJO, but as of today it looks good for the gassers.

[SergioSays]

what do La Nina's typically forecast for summer? hotter/lower than normal?

[dan_s]

The Pacific is actually moving to an El Nino this summer.

Keep watching Joe Bastardi's "Saturday Summaries" at this website: https://www.weatherbell.com/premium/

Joe will put out a summer forecast in April.