Oil & Gas Prices - Oct 20

[dan_s]

Opening Prices
> WTI is up $1.04 to $90.41/bbl, and Brent is up $1.00 to $93.38/bbl.
> Natural gas is down -4.4c to $2.913/MMBtu.

AEGIS Notes
Oil

Oil trades above $90/Bbl as escalating Middle East tensions add to an already tight market

Yesterday, the Pentagon reported increased drone attacks in Iraq and Syria, while an American destroyer intercepted missiles from Yemen's Houthi rebels targeting Israel (Bloomberg)
Additionally, Israel's military struck Hamas targets in Gaza and Hezbollah positions in Lebanon, and a ground invasion of Gaza seems imminent after positioning troops at the border
Concerns are rising that the conflict may spread to countries like Iran and possibly involve the US, which has increased its local military presence
My Take on Biden speech is that they will do anything not to put sanctions on Iran because Team Biden knows that the sanctions will push WTI over $120/bbl and hurt the Democrats chances in the next election cycle. It is always about power and money. Money laundering through Ukraine will continue. No one is tracking where that money goes.

Furthermore, Fed Chair Powell acknowledged signs of cooling inflation yesterday but said the Fed remains committed to its 2% mandate and hasn't ruled out a December interest rate hike
Yields on the benchmark 10-year Treasury rose briefly to 5%, a level not seen since 2007, and equities traded lower

U.S. plans to buy 6 MMBbl of oil for SPR at $79 (Bloomberg) < Other than bottom of the barrel slug, why would anyone sell decent crude oil for $79/bbl?
The U.S. DOE announced plans to buy 6 MMBbl of sour crude for the strategic petroleum reserve delivery in December and January at $79 or less
In response to the Russia-Ukraine war and rising gasoline prices, the Biden administration drew the SPR by 180 MMBbl to a 40-year low of 351 MMBbl from its 714 MMBbl capacity
Additionally, the DOE confirmed a prior purchase of 4.8 MMBbl at an average price under $73/Bbl and said it will continue monthly solicitations for available capacity through May 2024

Natural Gas

Natural gas prices extend losses, with the November contract down 28c this week to $2.90
The Winter ‘23/’24 strip is down 6c to $3.26, and the Summer ’24 strip is lower by 4c to $3.22

Kinder Morgan sees gas demand rising 20% by 2028 (S&P)
During their third-quarter earnings call, executive chairman Richard Kinder said, “We expect natural gas demand to grow by more than 20% through 2028, led by liquefied natural gas exports, exports to Mexico, and power generation”
Kinder Morgan’s CEO added that due to the large amount of Gulf Coast LNG demand, the Southeast gas market could be undersupplied
They also noted higher demand expected from Mexico, saying, “They're building a number of new power plants [in Mexico], which don't have supply yet… so there's opportunity to serve that new power plant load.”

Lake Charles LNG customers ask DOE to act on permit (S&P)
Shell, EQT, and SK Gas are requesting the Department of Energy reissue an export permit for the planned LNG export facility, enabling it to secure a final investment decision
Shell’s LNG subsidiary said in a letter to the DOE, “We fear that the Lake Charles LNG project will not only be delayed but ultimately canceled if the DOE does not promptly approve this export authorization, leaving its planned buyers without their contracted LNG supply,”
The planned facility would have a capacity of 2.2 Bcf/d

[dan_s]

Options are expiring today, which might have something to do with the selloff this morning.

[dan_s]

Closing Prices:
> Prompt-Month WTI (Nov 23) was down $-0.62 on the day, to settle at $88.75
> Prompt-Month Henry Hub (Nov 23) was down $-0.058 on the day, to settle at $2.899

Nov '23 WTI NYMEX contract gains $1.06 this week as it expires | Gas posts a 33.6c, or 10% loss this week