Oil & Gas Prices - April 22

[dan_s]

Opening Prices:
> WTI is down $1.49 to $71.04/bbl, and Brent is down $1.52 to $75.60/bbl.
> Natural gas is down -1.3c to $2.584/MMBtu.

AEGIS Notes
Oil

Oil falls from a two-week high amid Fed’s hawkish interest rate outlook
> August ’23 WTI lost $1.49 this morning to trade around $71/Bbl
> Equities and the dollar have weakened ahead of today's Jobless Claims report
> Powell maintained the Fed's hawkish stance in his congressional testimony yesterday (Reuters). He said that it was "a pretty good guess" to expect two more 25 basis point rate hikes before the year ends.
> Yesterday, the Bank of England unexpectedly hiked interest rates by 50 basis points due to persistently high UK inflation of 8.7% in May

EOG Foresees Crude Market Tightening with Reviving Chinese Manufacturing (BBG)
> EOG Resources sees a tightening crude market driven by a revival in Chinese manufacturing
> Despite China's weak industrial activity, EOG's COO Billy Helms expects a demand surge and a tighter market as manufacturing revives in the near term. He added that the U.S. production growth is expected to remain subdued at 0.6 MMBbl/d, with future supply limited by OPEC+ cuts. < All of the fundamentals point to an under-supplied global oil market today that should become clear by end of Q3.

India's Russian Oil Imports Soar Fueled by Lower Prices (Reuters)
> India's imports of Russian oil reached a record high of 1.95 MMBbl/d in May
> The increased dependence on Russia led to reduced imports from Iraq and Saudi Arabia, with Russia now constituting about 40% of India's oil imports
> In April, the landed price for Russian crude was significantly lower at $68.21/Bbl, compared to $77.76/Bbl for Iraq and $86.90/Bbl for Saudi Arabia

Natural Gas

Natural gas prices are trading around $2.60 after a 4.2% rally yesterday
> The Winter ‘23/’24 strip is at $3.55, and the Summer ’24 strip is trading at $3.29 < HH ngas prices are trending higher than what I am using in my 2023 forecasts. My 2024 forecasts are based on HH ngas averaging $3.50 for the year. There is a good chance we see HH over $4.00 in Q1 2024.

“Duck Curve” deepening as California’s solar capacity grows (EIA)
> Netload, or the remaining demand after subtracting renewables, in the CASIO system has trended lower during the middle of the day when solar peaks over the past several years
> Netload then increases in the evening when solar generation drops off, and natural gas plants must quickly ramp up to meet demand
> The resulting graph of net demand throughout the day is shaped like a duck, hence the name “duck curve”
> This presents challenges for the grid, as gas plants find it harder to match generation with demand, and economics are impacted by reduced operating hours of gas plants < Seems that everything they do in California is "Ass Backwards". Sad that much of the U.S. is going down the same path that will make electricity prices for consumers go up and reliability of supply go down.
> This dynamic is clearest in the California market; however, as solar becomes more prevalent, this effect will be seen across the US

Cheniere signs agreement with Equinor for expansion (Reuters)
> The contract will help the company secure financial support for its planned expansion of the Sabine Pass export facility
> The planned expansion would increase the capacity of the facility by 2.6-Bcf/d, with construction planned to begin in 2025, and commercial operations in 2032

[dan_s]

This is a classic "Roller Coaster" oil market. Up big one day and down big the next day, when the fundamentals all point to a very tight global oil market. Demand for oil-based products exceeds supply today and it will get worse in July.

Closing Prices:
> Prompt-Month WTI (Aug 23) was down $-3.02 on the day, to settle at $69.51
> Prompt-Month Henry Hub (Jul 23) was up $0.011 on the day, to settle at $2.608