Oil & Gas Prices - Oct 31
Posted: Thu Oct 31, 2019 8:43 am
Opening Prices:
WTI is down 58c to $54.48/Bbl, and Brent is down 14c to $60.47/Bbl.
Natural gas is up 3.5c to $2.726/MMBtu. < Thanks to early start to winter heating season.
Raymond James comments about Oct 30 EIA Petroleum Report:
This week's petroleum inventories update was bearish relative to consensus. "Big Three" petroleum inventories (crude, gasoline, distillates – including SPR) rose by 0.9 MMBbls, versus consensus estimates calling for a draw of 4.2 MMBbls. Turning to crude, total inventories increased by 5.0 MMBbls, versus consensus calling for a build of 0.5 MMBbls and a normal seasonal build of 4.1 MMBbls – note the total number includes a 0.7 MMBBl draw in the SPR. Refinery utilization rose to 87.7% from 85.2% last week. Total petroleum product demand increased 2.0% after last week’s 1.2% increase. On a four-week moving average basis, there is a 3.4% y/y increase in total demand.
Amid the U.S.-China trade war – where the latest headlines are mixed – alongside Brexit uncertainty, oil prices are being weighed down by the intensely negative macro sentiment, with day-to-day choppiness dominated by demand-related fears. Last month’s stunning oil supply disruption in Saudi highlighted the vulnerability of supply to geopolitical risk, and yet current oil prices are on par with where they had been before the attack. Even setting aside the Saudi situation, the fundamentally bullish supply side of the equation is largely being overlooked: the larger U.S. producers are exhibiting restraint in capital allocation, and U.S. well productivity improvements are slowing down; OPEC plus Russia’s production cuts – in place through March 2020 (and with chatter about a further extension) – include especially strong Saudi discipline; U.S. sanctions against Iran continue to be impactful; and IMO 2020 is looming less than three months from now.
The 12-month futures strip ($54.58/Bbl for WTI and $59.53/Bbl for Brent) shows modest backwardation for both Brent and WTI; for comparison, our recently reduced 2020 forecast is $70.00 WTI/$75.00 Brent. There remain several key question marks, such as: 1) on the bullish side, the possibility of supply disruptions above and beyond the current ones, such as a potential scenario of military escalation vis-à-vis Iran, and 2) on the bearish side, visible indications of global macro slowdown and resulting read-through for oil demand.
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Closing Prices;
WTI prompt month (DEC 19) was down $0.88 on the day, to settle at $54.18/Bbl.
NG prompt month (DEC 19) was down $0.058 on the day, to settle at $2.633/MMBtu.
WTI is down 58c to $54.48/Bbl, and Brent is down 14c to $60.47/Bbl.
Natural gas is up 3.5c to $2.726/MMBtu. < Thanks to early start to winter heating season.
Raymond James comments about Oct 30 EIA Petroleum Report:
This week's petroleum inventories update was bearish relative to consensus. "Big Three" petroleum inventories (crude, gasoline, distillates – including SPR) rose by 0.9 MMBbls, versus consensus estimates calling for a draw of 4.2 MMBbls. Turning to crude, total inventories increased by 5.0 MMBbls, versus consensus calling for a build of 0.5 MMBbls and a normal seasonal build of 4.1 MMBbls – note the total number includes a 0.7 MMBBl draw in the SPR. Refinery utilization rose to 87.7% from 85.2% last week. Total petroleum product demand increased 2.0% after last week’s 1.2% increase. On a four-week moving average basis, there is a 3.4% y/y increase in total demand.
Amid the U.S.-China trade war – where the latest headlines are mixed – alongside Brexit uncertainty, oil prices are being weighed down by the intensely negative macro sentiment, with day-to-day choppiness dominated by demand-related fears. Last month’s stunning oil supply disruption in Saudi highlighted the vulnerability of supply to geopolitical risk, and yet current oil prices are on par with where they had been before the attack. Even setting aside the Saudi situation, the fundamentally bullish supply side of the equation is largely being overlooked: the larger U.S. producers are exhibiting restraint in capital allocation, and U.S. well productivity improvements are slowing down; OPEC plus Russia’s production cuts – in place through March 2020 (and with chatter about a further extension) – include especially strong Saudi discipline; U.S. sanctions against Iran continue to be impactful; and IMO 2020 is looming less than three months from now.
The 12-month futures strip ($54.58/Bbl for WTI and $59.53/Bbl for Brent) shows modest backwardation for both Brent and WTI; for comparison, our recently reduced 2020 forecast is $70.00 WTI/$75.00 Brent. There remain several key question marks, such as: 1) on the bullish side, the possibility of supply disruptions above and beyond the current ones, such as a potential scenario of military escalation vis-à-vis Iran, and 2) on the bearish side, visible indications of global macro slowdown and resulting read-through for oil demand.
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Closing Prices;
WTI prompt month (DEC 19) was down $0.88 on the day, to settle at $54.18/Bbl.
NG prompt month (DEC 19) was down $0.058 on the day, to settle at $2.633/MMBtu.