Energy Prospectus

Opening Prices:
WTI is up 12c to $60.19/Bbl, and Brent is up 31c to $65.53/Bbl. < WTI is up to $60.58 at the time of this post.
Natural gas is up 6.2c to $2.358/MMBtu.

Yesterday, Raymond James published their updated view of the U.S. natural gas market.
"Here is the big picture: we expect the long-term U.S. gas market picture to be more balanced, though it would NOT be accurate to put us in the bullish camp. With the latest data points, the 2019 average is tracking to $2.65, below our $2.80 forecast from January. Looking ahead, we still think that $2.30 is the correct number for 2020, with slower supply growth being offset by higher starting inventories (and minor changes to our demand assumptions). Our 2020 forecast is still below consensus, but in line with the current futures strip (which has come down significantly in recent months). The expected slowdown in associated gas supply growth has a modestly more pronounced effect in 2021, suggesting a balanced market at $2.50. Our initial 2021 forecast is below consensus, but in line with the strip."

MY TAKE: The only thing that could push U.S. natural gas prices higher is a much colder than normal 1st quarter. January is expected to be colder than normal in the upper 1/3 of the country, but we need some BIG DRAWS from storage to drain gas storage. Pray for a few "Polar Vortex" cold waves. I'm assuming $2.30/mcf for Henry Hub gas prices in 2020 and 2021. Realized prices above $2.00 would be great for the Permian Basin companies because most of them have been getting less than $1.00 this year.

Bloomberg at 7AM ET -- Oil held near $60 a barrel on optimism the partial U.S.-China trade pact will bolster demand, while analysts estimated a pullback in American crude stockpiles.

Futures in New York were steady after rising 2.5% over the previous three sessions. A limited trade agreement, to be signed and released early next month, will see some tariffs reduced and prevent an escalation in the conflict between the world’s two largest economies. U.S. stockpiles of oil are projected to have declined by 1.75 million barrels last week, a Bloomberg survey showed.

While leaving most of the tariffs built up over the trade war in place, the partial deal has relieved investors worried about further escalation and driven gains across the commodity complex. It follows deeper-than-expected output cuts agreed by OPEC+ earlier in the month, which Citigroup Inc (NYSE:C). said will help keep a floor under prices and which allayed some of the concern that next year will see a renewed oversupply.

“The conditions for a rising oil price appear favorable at present,” said Eugen Weinberg, head of commodities research at Commerzbank AG (DE:CBKG) in Frankfurt. “Economic optimism coupled with a weaker U.S. dollar and growing investor demand have allowed Brent and WTI to climb.”

West Texas Intermediate for January delivery rose 4 cents to $60.25 a barrel on the New York Mercantile Exchange as of 10:27 a.m. London time. It rose 0.2% on Monday and is up around 9% so far in December.

Brent for February settlement edged up 9 cents to $65.43 a barrel on the London-based ICE Futures Europe Exchange, after climbing 0.2% on Monday. The global benchmark crude traded at a $5.24-a-barrel premium to WTI for the same month.

If the Bloomberg survey is confirmed by Energy Information Administration data due Wednesday, it would be only the third weekly decline in inventories this quarter and would help to reduce concern over ample supply. However, the EIA said Monday that it expected American shale production to rise by 30,000 barrels a day to around 9.14 million in January.

The leaders of the "Wall Street Herd" have started to move up their oil price forecasts. A few more of these and we will see a big rotation of money into the upstream oil & gas companies.

(Reuters) - JP Morgan on Tuesday raised its oil price outlook and forecast supply-demand balance to tighten next year against the backdrop of the OPEC and its allies increasing output cuts and stronger economic growth in emerging markets.

The investment bank revised its Brent price forecast to $64.50 per barrel in 2020 from $59 earlier, although it expects prices to slip to $61.50 in 2021.

West Texas Intermediate prices are seen following a similar trajectory with prices averaging $60 per barrel in 2020 and $57.50 in 2021, JP Morgan said.

The end of UK electoral uncertainty and the U.S.-China trade truce along with fading of idiosyncratic headwinds in some of the larger emerging markets economies have improved the global growth outlook for next year, the bank said.

"In contrast to our September forecast that the global oil market will be in surplus of 0.6 million barrels per day (mbpd) on average for 2020, we now estimate the market will be in deficit of 0.2 mbpd," the bank said. < This is the beginning of the "Paradigm Shift" we have been waiting for.

JP Morgan continues to expect global oil demand growth at 1 mbpd. The OPEC, Russia and other producers, a group known as OPEC+, have agreed to cut output by an extra 500,000 barrels a day in the first quarter of 2020.

Oil prices remained near a three-month high on Tuesday on hopes that a full-fledged U.S.-China trade deal is in the pipeline and set to stoke oil demand in the world's biggest economies.