Oil & Gas Prices - May 16

[dan_s]

We still have a few seats available for today's EPG luncheon at Tanglewood, 5430 Westheimer Rd.
If you have not registered, call Sabrina at 832-788-9304 if you'd like to attend.
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Opening Prices:
> WTI is up $0.06 to $71.17/bbl, and Brent is up $0.08 to $75.31/bbl.
> Natural gas is up 3.9c to $2.414/MMBtu.

AEGIS Notes
Oil

Oil remains relatively unchanged after rebounding slightly yesterday
> June ’23 WTI is up 6c this morning to trade around $71.17/Bbl
> Crude initially dropped by over 50c following China's weak economic data
> Prices recouped some losses after the IEA increased their 2023 global demand growth forecast by 0.2 MMBbl/d
> The upward trend, marking the first rise in three sessions, was bolstered by the U.S.'s plans to restock the SPR and Canadian wildfires disrupting at least 0.3 MMBbl/d of production (Reuters)
> IEA also said that Russia hadn’t implemented the pledged output cuts and needs to cut 0.3 MMBbl/d in May to reach the target level (BBG)
> Russian seaborne crude exports rose again for the week ending May 12, marking the fourth increase in five weeks and hitting a new high, with most flows directed to Asia

U.S. to buy 3 MMBbl to refill SPR in August (BBG)
> The U.S. is gearing up to purchase as much as 3 MMBbl of sour crude oil with the aim of restocking SPR, following the sale of over 200 MMBbl last year to moderate soaring energy costs
> Energy Secretary Jennifer Granholm announced last week that the U.S. plans to buy back crude for the SPR once the drawdowns conclude in June
> The DOE also clarified that its refill strategy involves recovering oil from earlier trades in addition to direct purchases

China maintains high refining in anticipation of a demand rebound (BBG)
> Chinese refiners maintained near-record levels of oil processing last month despite some plants undergoing seasonal maintenance
> The processing volume in April was close to 15 MMBbl/d, consistent with the amount processed in March
> China has stepped up its crude processing in anticipation of a surge in demand with the easing of its Covid restrictions

Natural Gas

Natural gas prices are trading higher, around $2.41, the highest level since March
> The Winter ‘23/’24 strip is trading at $3.66, and the Summer ’24 strip is trading $3.36 < All of my forecast models are based on HH ngas averaging $3.50 in 2024. My "hope" is that ngas is over $5.00 by the end of 2024 as new LNG export facilities start coming online.
> Production continues to remain around monthly lows of 100.5 Bcf/d amid pipeline maintenance in the US Northeast

New Canadian LNG project to file an environmental application (S&P)
> Ksi Lisims is looking to file its final environmental application with the government of British Columbia later this year for its 1.6 Bcf/d export facility
> Construction of the plant could begin in 2024, which would make the facility operational in 2027-2028
> This would be the fourth planned Canadian LNG export facility, with LNG Canada starting in 2025 and the approval process underway for Woodfibre LNG and Cedar LNG

EIA forecasts Henry Hub Spot price to increase from recent lows (EIA)
> The agency expects spot gas prices to remain below $4.00/MMBtu in 2023 but rise from recent lows made around $2.00/MMBtu to average $2.91/MMBtu
> The primary driver of their expectation is for power sector gas consumption to average 38 Bcf/d, the second most behind 2022

[dan_s]

Closing Prices:
> Prompt-Month WTI (Jun 23) was down $-0.25 on the day, to settle at $70.86
> Prompt-Month Henry Hub (Jun 23) was up $0.001 on the day, to settle at $2.376