Oil & Gas Prices - June 3

[dan_s]

Comments below are from Trading Economics with my comments in blue

WTI crude oil futures fell over 2% to about $75 per barrel on Monday, the lowest in four months. This drop followed a complex deal by OPEC+ to extend output cuts, many into 2025. OPEC+ is currently reducing output by 5.86 million barrels per day (bpd), about 5.7% of global demand. They agreed to extend 3.66 million bpd of cuts due to expire this year until the end of 2025 and keep 2.2 million bpd of voluntary cuts until September, gradually phasing them out by September 2025.
> Traders of WTI futures contracts found the decision somewhat disappointing, given the expected gradual unwinding of the 2.2 million bpd cuts.
> OPEC's move aims to support the market amid weak demand growth, high interest rates, concerns over China's demand, and rising non-OPEC production.

US natural gas futures climbed over 5% to surpass $2.7/MMBtu on Monday, building on a 30% increase seen in May, driven by growing demand amid the onset of summer heat.
> Forecasts indicate continued high demand due to severe western heat through the first half of June.
> Additionally, gas flow to LNG export facilities has been on the rise, especially with the Freeport LNG plant in Texas back in operation.
> However, prices experienced a decline of over 6.5% last week as some drillers boosted gas extraction, exacerbating concerns about oversupply.
> According to the latest EIA report, gas stockpiles are approximately 26.5% higher than the seasonal average. < Per EIA, natural gas storage builds in the U.S. have been below the 5-year average for the last five weeks. That trend should continue with summer heat increasing demand for power generation, LNG exports expected to remain near capacity, and a new large LNG export facility expected to come online in Q3.

MY TAKES:
> The "Right Price" for oil is higher than $75/bbl. The Paper Traders seem a bit confused by the talk (and that's all it is) that OPEC+ will gradually unwind 2.2 million bpd of production cuts starting in Q4.
> Market Forces will rebalance the U.S. natural gas market. Considering how large the market for U.S. natural gas is, it is really not over-supplied now. I will be raising the ngas prices used in my forecast models soon.
> The U.S. NGL market is in much better shape than a year ago thanks to a big increase in export capacity. It is a preview of what is ahead for dry gas with 3 large LNG export facilities coming online soon.