Oil & Gas Prices - May 23

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dan_s
Posts: 34964
Joined: Fri Apr 23, 2010 8:22 am

Oil & Gas Prices - May 23

Post by dan_s »

Opening Prices:
> WTI is up $0.96 to $73.01/bbl, and Brent is up $0.90 to $76.89/bbl.
> Natural gas is down -3.5c to $2.365/MMBtu.

AEGIS Notes
Oil

Oil trades higher ahead of the start of U.S. driving season and amid Saudi warning to short sellers
> June ’23 gained nearly $1 this morning to trade above $73/Bbl
> The expectation of high fuel demand ahead of the start of U.S. driving season this weekend supports prices < The combination of more demand and the blending requirements of "Summer Blend" gasoline, increases crude oil demand by ~2 million bpd from Q1 to June.
> The debt ceiling talks continue without a conclusive resolution from the recent meeting between President Biden and Speaker McCarthy
> Saudi Arabia's Energy Minister Salman hints at potential further cuts being a topic in the upcoming June OPEC+ meeting (BBG)
> Despite Kremlin's production cut claims, Russia's seaborne crude exports have hit a record high since 2022 (BBG)
> Additionally, ongoing wildfires in Canada's Alberta region have halted about 260,000 Bbl/d of oil production < CPG, IPOOF and ROK have been forced to shut-in some wells. None of them expect serious damage to wells or surface facilities, but Q1 production will be impacted.

Saudi Arabia's Energy Minister warns speculators ahead of OPEC+ meeting (BBG)
> Saudi Arabia's Energy Minister, Prince Abdulaziz bin Salman, has cautioned crude short sellers ahead of the forthcoming OPEC+ meeting scheduled for June 3-4
> Contrarily, other OPEC+ members believe that further actions are unnecessary as global oil inventories are expected to shrink in 2H2023 as China’s demand recovery accelerates

Russia's seaborne crude exports soar for the sixth straight week (BBG)
> The four-week average of Russian seaborne crude exports rose for the sixth consecutive week, now close to 4 MMBbl/d
> There's been a 15% increase in these exports since the start of April, the highest since Bloomberg initiated tracking in 2022
> Despite low refinery activity due to seasonal maintenance, Russia is maintaining high seaborne exports, likely by tapping into its oil inventories

Natural Gas

Natural gas prices are trading lower, around $2.36, after falling 18c yesterday
> The Winter ‘23/’24 strip is trading at $3.52, and the Summer ’24 strip is at $3.27 < NYMEX strip prices are above the HH ngas prices that I am using in my forecasts: $2.25 for Q2, $2.50 for Q3 and $2.75 for Q4. All four of our gassers (AR, CRK, EQT and RRC) will remain profitable at these prices.
> Wind generation for electricity continues to underperform, at a multi-year low of 25 GW, while solar generation is at a multi-year high of 18 GW
> Lower performance from renewables will generally lead to higher usage of natural gas, which is generating about 160 GW of electricity

Gas flaring in the Permian could rise in 2024 (Reuters)
> It is estimated by East Daly Analytics that pipeline takeaway capacity in the Permian could be lower than gas production by an average of 200 MMcf/d in 2023 and 500 MMcf/d in 2024, leading to increased flaring < Here's an idea: Instead of wasting more $Billions on windmills in West Texas, why not put natural gas fired power plants in the Permian Basin.
> Any potential construction delays on planned pipes in the basin would result in higher levels of flaring than estimated
> A total of 4-Bcf/d of pipeline takeaway capacity will be added through 2024 from the Whistler Pipeline, Matterhorn Express, and Permian Highway Expansion
> Larger producers such as Exxon, ConocoPhillips, and Chevron would likely delay completions and shut in production rather than increase flaring

Cameron LNG concludes maintenance (BBG)
> The export facility had been running at a reduced rate, with one of its three trains offline for maintenance since April 28
> The plant has a total capacity of 2.3 Bcf/d, but feedgas levels fell to 0.9 Bcf/d last week
> Total US LNG feedgas levels have recovered to 13 Bcf/d as of this morning
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34964
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - May 23

Post by dan_s »

Jet fuel demand is still below pre-pandemic level, but steadily increasing.

From OilPrice.com
- According to S&P Platts, global air travel has finally returned to pre-pandemic levels this month as total commercial flights per day averaged 105,682 in the first two weeks of May, up 20% year-on-year.

- Global jet fuel demand, however, is expected to remain below 2019 levels for now as efficiency gains and a slower rebound in long-haul travel, especially in Asia, limit the consumption upside for the fuel.

- IATA estimates that new airplanes trigger fuel efficiency gains of around 2% per year and the pandemic has seen a widespread drive to replace older aircraft.

- With international seat capacity now 10% below 2019 same-month levels, attesting to flights being on average shorter than before, a full jet fuel demand recovery to 8 million b/d isn't expected until 2027.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34964
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - May 23

Post by dan_s »

Trading Economics:
"WTI crude futures have been trading near the $72 per barrel level in the past three sessions, due to concerns over a potential US debt default. Despite expectations of a tighter market driven by factors like seasonal gasoline demand, OPEC+ supply cuts, and increased oil demand from Asia, the risk of a debt default has limited price gains. On top of that, the US Department of Energy plans to purchase 3 million barrels of crude oil to replenish the Strategic Petroleum Reserve in August. However, negotiations to raise the US debt limit have raised apprehension among investors, as a potential default could lead to financial market chaos and interest rate spikes, negatively impacting fuel demand growth both domestically and globally."
MY TAKE:
> There is ZERO chance of a U.S. debt default.
> Putting 3 million barrels of heavy sour oil back into the SPR will have ZERO impact on WTI oil prices.
> All the fundamentals point to an under-supplied oil market this summer.

"US natural gas futures slumped below $2.4/MMBtu from a 2-month high of $2.7 last week, driven by increased output and revised forecasts indicating lower demand in the coming week. The average gas output in the U.S. Lower 48 states rose to 101.5 billion cubic feet per day (bcfd) so far in May, surpassing April's record. Additionally, U.S. gas demand including exports is expected to decline from this week to the next and meteorologists projected near-normal weather conditions through June 6. However, U.S. power generators increased gas usage to compensate for low wind power, and gas exports from Canada remain lower than normal due to wildfires in Alberta. Meanwhile, gas flows to major LNG export plants have decreased due to maintenance work."
> Weather will always be a significant driver of U.S. natural gas prices.
> Market forces, including fewer gas wells being completed, will tighten up the U.S. gas market this summer.
> HH ngas should be back to $3.00 by early November.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34964
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - May 23

Post by dan_s »

Closing Prices:
> Prompt-Month WTI (Jul 23) was up $0.86 on the day, to settle at $72.91
> Prompt-Month Henry Hub (Jun 23) was down $-0.079 on the day, to settle at $2.321
Dan Steffens
Energy Prospectus Group
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