Oil & Gas Prices - Mar 31

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Oil & Gas Prices - Mar 31

Post by dan_s »

Opening Prices
> WTI is up $0.54 to $74.91/bbl, and Brent is up $0.21 to $79.48/bbl.
> Natural gas is up 7.2c to $2.176/MMBtu. (As of 08:14 AM CDT)

AEGIS Notes with my comments in blue
Oil

Oil heads for a weekly gain amid ongoing Iraqi Kurdistan supply dispute
May ’23 WTI gained 54c this morning to trade around $75/Bbl and is set to post a $5, or 8% gain this week

Gulf Keystone Petroleum cuts production in Iraqi Kurdistan, adding to the Iraq production slowdown
Kurdistan Regional Government to meet with Baghdad next week for talks on resuming crude shipments after no deal was made to restart Kurdish exports from Turkish ports this week < As the global oil market tightens this summer, even small supply disruptions should send oil prices higher. Based on the March IEA "Oil Market Report" there will be no spare production capacity anywhere in the world by Q4 2023.

The core personal consumption expenditure index rose 4.6% in February, below the projected 4.7% and down from January's 4.7%
The lower-than-expected report could reassure the Fed that its interest rate hikes are slowing the economy and controlling inflation
Also, the U.S. Dollar remains low relative to its recent highs, making oil more affordable for holders of other currencies

Lower Energy Costs Act, passed by the U.S. House of Representatives, heads to Senate for approval (Reuters)
The act passed the House by a vote of 225 to 204, but it appears unlikely to pass the Senate
The bill focuses on limiting reviews of future fossil fuel projects, increasing the production of fossil fuels, and lowering energy costs
Additionally, the Greenhouse Gas Reduction Fund, which aims to lower the price of renewable energy, would also be repealed by the bill. The Biden administration stated that the president would veto the bill if it were to pass the Senate
This is just more political posturing in Washington. We need a Common Sense Energy Plan, but there is very little common sense in Washington.

Russian oil price cap to remain at $60/Bbl, says the European Commission (BBG)
The European Commission has told its member states that the $60/Bbl on Russian oil prices will remain unchanged for now, as it is effective in reducing Moscow's revenues without disrupting the market
According to IEA, Russian crude averaged $52.48/Bbl in exports (excluding shipping and insurance costs), with Urals crude selling for $45.27/Bbl in the Black Sea
Meanwhile, grades like ESPO, Sakhalin, and Sokol that are exported from Asia traded above the threshold
However, EU member states were told that there is a willingness to consider making the price-cap mechanism less rigid, but it was not clarified how this would work in practice
Russian oil production will decline because they are running out of money. The Russian economy cannot survive without lots of revenue from oil & gas sales, especially when they are funding a war at the same time.

Natural Gas

Natural gas prices rise nearly 5% to $2.18 after falling 8c yesterday
The balance of the summer strip is higher by 8c to $2.60, and the Winter ‘23/’24 strip is up 6c to $3.59

Weather forecasts shifted cooler, with the Lower 48 forecast cooling by 6 °F over the two-week forecast period < Take a look at the 10-day weather forecast for Chicago and you will see that we should have at least two more draws from storage that should push end of winter storage level below 1,800 Bcf on April 7. 1,800 Bcf is well within the 5-year range for storage at this time of year.

Gas flows into Freeport LNG are at 1.94 Bcf/d, close to the capacity of 2.1 Bcf/d

ICE reports record liquidity in US natural gas markets (Business Wire)
Open interest in North American gas markets reached a record high of 17.45 million contracts, up 17% year-over-year
Some trading hubs have seen significant increases in volumes, such as Houston Ship Channel, where volumes are up 85%, and CIG Rockies, with volumes up 243%
Much of the increase in activity is focused on the options market, with Henry Hub options volume up 46% year-over-year
A spokesperson for ICE attributed the increase in trading activity to higher demand for hedging which has attracted more participants to the market
It is the "paper trading" of natural gas futures contracts exceeding the physical supply that will continue to cause wild swings in the natural gas price. Ironically, we will see more price spikes up in the summer than the winter.

Enterprise sees LNG demand threatening to outpace supply (S&P)
Midstream operator Enterprise said that production would need to increase from current levels to meet the amount of LNG feedgas demand coming online over the next few years
A representative of the company said, “We have enough natural gas to feed what’s under construction, but we are not drilling enough today for the likely and the potential,”
Enterprise said it sees LNG feedgas demand climbing to 23.9 Bcf/d by 2026, compared with this month's average demand of 13.1 Bcf/d < This is why the long-term outlook for our "gassers" is bright. Plus, domestic demand for natural gas will also increase year-after-year.
Dan Steffens
Energy Prospectus Group
ChuckGeb
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Joined: Thu Nov 21, 2013 2:46 pm

Re: Oil & Gas Prices - Mar 31

Post by ChuckGeb »

I have had a positive long term outlook on natural gas for a long time! Last year was a good ride. This year quite a disappointment. Hoping all of the LNG projects come to fruition as planned. As Obama once said "Never underestimate (Beijing) Joe's ability to f23& things up!" The post above indicates that Freeport is back in action. I have never seen such a significant issue (closure, safety drills, permits delays, reopening) get so little coverage. I suppose that is because it is a non-public project. They should have put Hunter on their BOD!
dan_s
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Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - Mar 31

Post by dan_s »

Think about this. If Freeport LNG had been online from June 2022 thru February 2023 exporting ~2 Bcfpd, there would be over 500 Bcf less ngas in storage and the price of HH gas would be more than triple where it is today.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - Mar 31

Post by dan_s »

Per EIA's 914 report (first look at actual U.S. production by month)
U.S. oil production
> 12,417,000 bpd in October
> 12,101,000 bpd in December
> EIA's weekly guestimates were 12.2 to 12.3 million bpd in Q1 2023 and my WAG is that U.S. oil production was flat at close to 12.1 million bpd.

As Matt Iak and I discussed on Tuesday's webcast, it was the completion of thousands of high-quality "DUC wells" in the first half of 2022 that increased U.S. oil production. The current DUC inventory now contains a lot of "Dead DUCs" that will never be completed. We are not completing enough new horizontal shale wells this year to get U.S. oil production anywhere close to pre-pandemic production of 12.9 million barrels per day.
Dan Steffens
Energy Prospectus Group
ChuckGeb
Posts: 945
Joined: Thu Nov 21, 2013 2:46 pm

Re: Oil & Gas Prices - Mar 31

Post by ChuckGeb »

Re LNG: Yes and the current regime has 22 more months and their left over (fill in the blank) bureaucrats have ?????? longer. Think about that! Geez we still don't know who is responsible for blowing up the Nordstream Pipeline, where COVID originated, and really don't don't know much about the accident that shut down Freeport all this time. There is a lot of gas current and future that is under the supervision of a very (fill in the blank) administration.
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - Mar 31

Post by dan_s »

Closing Prices:
> Prompt-Month WTI (May 23) was up $1.30 on the day, to settle at $75.67
> Prompt-Month Henry Hub (May 23) was up $0.112 on the day, to settle at $2.216

Very bullish week for oil and (ironically) it may be the end of the winter heating season that causes natural gas prices to drift higher. Why? because we had a "glut" of long HH ngas futures contract that needed to be sold. We do not have a "glut" of gas in the physical market.
Dan Steffens
Energy Prospectus Group
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