Oil & Gas Prices - April 4

[dan_s]

Opening Prices:
> WTI is up $0.76 to $81.18/bbl, and Brent is up $0.71 to $85.64/bbl.
> Natural gas is up 3.2c to $2.129/MMBtu. (As of 08:09 AM CDT)

AEGIS Notes with my comments in blue
Oil

Oil advances for a second day after OPEC+’s surprise production cut
May ’23 WTI gained 76c this morning to trade around $81.18/Bbl

Both crude benchmarks climbed over 6% on Monday following OPEC’s new 1.66 MMBb/d output cut
The latest announcement brings the total volume of cuts by OPEC+ to 3.66 MMBbl/d, including October's 2 MMBbl/d, equal to about 3.7% of global demand
However, summer driving may boost demand near term, but high oil prices could cause inflation, rate hikes, and potentially dampen demand < I know that $100/bbl oil would be nice for our stocks, but we don't want higher transportation fuel prices to push inflation up even further. Our upstream companies will be extremely profitable if WTI stays in the $80s. However, if OECD petroleum inventories start falling rapidly (as Raymond James and Goldman Sachs are now forecasting) we will see triple digit oil prices later this year. My forecast models now assume that WTI will average $90/bbl in Q4 2023 and all of 2024.

Kurdistan regional government to sign Iraq deal today to resume its 0.4 MMBbl/d oil exports

OPEC+ cut may prompt Asian buyers to reconsider strategy (SPGlobal)
Leading buyers like China and India may be less impacted due to the ongoing flows of Russian crude, but other Asian buyers may have to consider other alternatives
Asian refiners, including South Korea and Japan, depend on Middle Eastern crude. Higher benchmark oil prices or spot premiums for Middle Eastern crude could affect fuel demand and Asian consumer confidence

China's 2Q2023 demand recovery is expected to be slow as maintenance season begins, offsetting the bullish impact of the OPEC+ cuts in the near term < Annual maintenance also impacts U.S. refiners' demand for crude oil. By the end of May, maintenance season should be over and demand for crude oil will increase by at least 2 million bpd over where it is today. U.S. refiners are already starting to ramp back up.
In 2H 2023, however, the cuts might tighten supply as China is expected to see accelerated demand recovery

OPEC+ likely aimed to hurt oil short-sellers with the surprise cut (BBG)
The decision to hold back over a million barrels of oil from the market was made quickly and in a tight circle of people, said delegates
Many delegates found out just a day or two before the announcement
While the move was successful in catching short sellers off guard, it also impacted consumers and the global economy, causing concerns about inflation and prompting bets on further interest rate hikes

Natural Gas

Natural gas prices are mostly unchanged despite warmer weather forecast changes
Lower 48 weather forecasts warmed by 16.2 °F, pushing expected temperatures for April above the 10-year average
The Northeast region’s forecast warmed by 35.9 °F and the Midwest by 45.5 °F, cumulatively over the 2-week forecast period

Early cycle pipeline nominations indicate gas production down 2.1 Bcf/d, bringing total production to about 98.5 Bcf/d < The large-cap gassers will tighten up the U.S. natural gas market by delaying well completions and choking back some wells.

Federal court tosses Mountain Valley Pipeline water permit (Reuters) < The insanity continues.
The US Fourth Circuit Court of Appeals has thrown out a water permit issued by the state of West Virginia that will be required to complete the construction of the 2-Bcf/d pipeline
The court found defects in the review that preempted the issuance of the permit and said that Equitrans has a history of water violations, which warrants closer scrutiny
While the project is 94% complete, the majority of unfinished sections are water crossings which require a special permit and environmental review

US LNG exports reached a record high in March (Reuters)
Gas flows into US LNG plants in March totaled 13.2 Bcf/d and have averaged 14.1 Bcf/d so far in April
This rise in exports comes amid the restart of the Freeport LNG export plant, which was receiving about 2.2 Bcf/d yesterday
108 LNG cargoes were shipped from US ports in March, with 71% heading to Europe and 17% to Asia
From 2022 to 2027 U.S. natural gas export capacity (LNG and pipelines to Mexico) will increase from 20 Bcfpd to 32 Bcfpd.

[dan_s]

I got an interesting email from one of our members in Brazil.  The oil-to-gold ratio is now out of whack.  Today an oz of gold can by 25 barrels of oil.  Historically whenever the ratio goes higher than 20/1 either oil goes up or gold goes down.  I don't think gold is going back down and everything I read says WTI's going over $100 late this year.

[Fraser921]

whats the gold to ng ratio?

2000/2 1000 to 1 used to be 1800/10 180 to 1

[dan_s]

Closing Prices:
> Prompt-Month WTI (May 23) was up $0.29 on the day, to settle at $80.71
> Prompt-Month Henry Hub (May 23) was up $0.009 on the day, to settle at $2.106

Bullish API storage report after the market closed.
API crude inventories reported 4.35 million barrel draw
Gasoline down 3.97 million barrels (Spring Break travel)
Distillates down 693,000 barrels
Cushing, OK crude down 1.04 million barrels.

MAY23 up to $81.05 in after hours trading.

Technically, there is strong resistance at $81/bbl. If WTI can end the week over $81, there is only weak resistance until $90.