Oil & Gas Prices - Oct 25

[dan_s]

My internet service was down from noon to 10:45PM yesterday (very frustrating). Everything is now a "go" for today's webinar with Kolibri Global Energy.

This should stabilize oil prices. API reported the following after the market closed yesterday.
During the week ending October 20:
> U.S. crude inventories declined by 2,668,000 barrels
> Gasoline inventories down BIG by 4,169,000 barrels
> Distillate inventories down 2,313,000 barrels
> Inventories at Cushing, OK hub increased 513,000 barrels. < Still much lower than normal.

Opening Prices:
> WTI is up $0.16 to $83.90/bbl, and Brent is up $0.25 to $88.32/bbl.
> Natural gas is up 4.9c to $3.02/MMBtu.

AEGIS Notes
Oil

Oil prices are mostly unchanged this morning, around $83.72, ahead of the EIA storage report

Outages at the Osage and Cushing South pipelines may have limited flows out of Cushing, and increased freight costs in the Gulf Coast may have limited exports, leaving more crude in storage at Cushing

Pierre Andurand says for Saudi Arabia to ease production cuts, oil must hit $110 (BBG)
Oil trader Pierre Andurand of Andurand Capital Management said, “The Saudis will have to decide when and at what price to bring supply back,” adding further, “For me, an adjustment likely will have to come around $110 a barrel, so there’s room to the upside for prices”
Since July, Saudi Arabia has said they will implement a unilateral production cut of 1 MMBbl/d on top of the existing OPEC cuts
Andurand also said that they see oil demand hitting a record high later this decade before declining

Canadian Transmountain Pipeline expansion may need external funds (BBG)
The long-delayed and over-budget pipeline, owned by the Canadian government, may require external financing just months before the expected startup, according to the country’s Auditor General
The Office of the Auditor General said, “If the corporation cannot finance the full remaining construction of the pipeline expansion, it will be unable to put the expanded pipeline into service to generate revenue”
The expansion, which has so far cost $22.2 Billion USD, will more than double the amount of capacity on the existing Transmountain pipeline, which ships oil from Alberta to Vancouver, British Columbia

Natural Gas

Gas extends gains as overnight weather forecasts came in bullish for the third straight day
Nov ’23 Henry Hub gained 4.9c this morning to trade around $3.02/MMBtu
The Winter ‘23/’24 strip is up 3.8c to $3.364, and the Summer ’24 strip is up by 1.9c to $3.266

Weather forecasts shifted cooler for late Oct. and early Nov., with the Lower 48 forecast falling by 3.9 °F over the two-week period
Demand is currently around 70.17 Bcf/d, and with today’s forecast, a net gain of +5 Bcf is estimated over the next 14 days
Gas production fell slightly by 0.1 Bcf/d to around 101.48 Bcf/d, driven by losses in the Northeast

Permian volumes remain constrained due to pipeline maintenance, especially the PHP limitations set at 1.73 Bcf/d from Oct 22-30, 2023, with expected full operations resuming on Oct 31

Kinder Morgan will conduct inspections & maintenance on the Gulf Coast Express line in Nov., altering capacity: 1.2 Bcf/d (Nov 14-15), 1.35 Bcf/d (Nov 16-17), and 1.6 Bcf/d (Nov 18-20). Full service is expected on Nov 21

FERC dismisses gas demand concerns, backs GTN expansion (S&P)
The US FERC backs the GTN XPress Project in the Pacific Northwest, citing existing full-capacity precedent agreements as proof of need
Despite objections from Washington, Oregon, and California regarding state climate policies impacting gas demand, FERC maintains that state policies alone don't limit their authority to approve projects
The $75 million GTN expansion aims to bolster the current system with an additional 50,980 horsepower of compression across three compressor sites to facilitate the transportation of nearly 150 MMCf/d
The expansion would likely ease pipeline capacity constraints in the Pacific Northwest, weighing on the Northwest basis prices

[dan_s]

Closing Prices:
> Prompt-Month WTI (Dec 23) was up $1.65 on the day, to settle at $85.39
> Prompt-Month Henry Hub (Nov 23) was up $0.039 on the day, to settle at $3.010

The confusion over where the War in Israel is heading is what's causing the volatility in the price of oil. Natural gas prices will be driven by weather reports. It does look like some very cold air is heading all the way down to South Texas this weekend. A mid-November draw from storage would be nice.

Supply/Fundamentals for oil remain very bullish. Demand exceeds supply.