Oil & Gas Prices - Dec 21

[dan_s]

Oil prices declined more than 5% on Monday, with WTI trading around $46.8 a barrel and Brent about $49.8 a barrel, dragged down by concerns about fuel demand after a fast-spreading new coronavirus strain led the UK to impose a harsher lockdown and several countries like France, Germany and Italy to announce restrictions on UK travel. Traders paid little to no attention to news that US Congress had agreed on a $900 billion virus relief bill, with votes likely later in the day.

Opening Prices:
> WTI is down $2.14 to $46.96/Bbl, and Brent is down $2.23 to $50.03/Bbl.
> Natural gas is down 2.6c to $2.674/MMBtu.

Aegis Hedging Solutions Morning Notes:
Crude Oil
WTI is down $2.14 to $46.96/Bbl, and Brent is down $2.23 to $50.03/Bbl

Oil retreats from its recent highs as a broader market sell-off is underway on reports of a new coronavirus strain in London (Reuters)
Countries have begun announcing travel bans from Britain to keep the spread of coronavirus’s new strain to a minimum. U.S. Assistant Health Secretary Brett Giroir announced on Monday that “everything was still on the table,” implying the U.S. could be the next country to impose a travel ban on Britain or even several EU countries where the new strain has been detected
The strain, referred to by some as the B.1.1.7 lineage, is said to be up to 70% more contagious, though the lethality rate and effects are reported to be the same as the parent strain
AEGIS notes the new strain could have an immediate impact on oil demand as the new coronavirus strain is likely to cause a change in consumer/ travel behavior. New international lockdowns threaten the recovery in transportation fuels demand

Russia is rumored to support a 500 MBbl/d output hike in February, according to officials familiar with the country’s oil policy (Bloomberg)
A 500 MBbl/d increase would be the maximum allowed by the accord reached by the cartel in early December
Saudi Oil minister Abdulaziz bin Salman has remained adamant about maintaining current output cuts through the end of 1Q2021

The Baker Hughes oil rig count showed a gain of five rigs to bring the total oil rig count to 263 < We need AT LEAST 500 rigs drilling for oil to stabilize U.S. oil production.
The Permian basin added six rigs, while the Denver-Julesburg lost one rig, and the Eagle Ford rig count remained unchanged
The recent rig additions have helped the total oil-directed drilling rig count to increase by 91, from a bottom of 172 rigs during the week ending August 14 to 263 rigs during the week ending December 18

Natural Gas
Natural gas is down 2.6c to $2.674/MMBtu

Two natural gas pipelines from Williams were placed into service early as the company plans to increase the flow of supplies in the East and Midcontinent regions, according to Williams
Transco’s Leidy South, an expansion of Williams’ existing Pennsylvania energy infrastructure, brought 125 MMcf/d of capacity on line November with the remaining 457 MMcf/d expected to be complete in 2021 (WorldPipelines)
Leidy South will enable Transco to provide 582 MMcf/d of incremental firm transport capacity for gas produced in northern and western Pennsylvania to markets in Transco’s Zone 5 and Zone 6
Southeastern Trail, a Transco transmission expansion project to serve growing demand in the Mid-Atlantic and Southeastern U.S., commenced partial in-service of 150 MMcf/d in November and an additional 80 MMcf/d in December.
The balance of the 296 MMcf/d project is expected to come on line in 1Q21

Speculative traders increased their bets on rising natural gas prices by about 16k contracts as of December 15 (CFTC)
Net-length, the difference between outright long and short positions, stands just above the seasonal five-year average
AEGIS notes that bullish gas bets rose quickly over summer as the crude oil production collapse reduced associated gas volumes. Money manager’s net-length peaked out at 154k contracts on October 20 – 10 days prior to natural gas 2020 price peak. Warm weather has caused a reduction in net-length over the past two months.

[dan_s]

Closing Prices;
> WTI prompt month (JAN 21) was down $1.36 on the day, to settle at $47.74/Bbl.
> NG prompt month (JAN 21) was up $0.005 on the day, to settle at $2.705/MMBtu.

Weather forecast turning a bit more bullish for ngas: https://www.wunderground.com/forecast/u ... ILCHICA779