Oil & Gas Prices - Dec 31

[dan_s]

We survived 2020!

Opening Prices:
> WTI is down 48c to $47.92/Bbl, and Brent is down 52c to $51.11/Bbl.
> Natural gas is up 6.5c to $2.487/MMBtu.

Aegis Hedging Solutions morning notes: With my comments in blue.
Crude Oil

New COVID-19 strain sends 2021 oil outlook lower, according to a Reuters poll
> A poll of 39 economist forecast that crude prices will average $49.35/Bbl in 2021, up from the November consensus of $46.40/Bbl < I have been using $50/bbl for WTI in my 2021 forecasts, but I have been adjusting for regional differentials and each company's hedges. Differentials in West Texas have come way down, which will raise my valuations for the Permian Basin companies.
> In an accompanying note, an economist commented “Additional lockdown measures and the careful OPEC+ dance of raising output will be the focal point for the first half of the year.”

The number of oil-directed drilling rigs was 267 during the last week of 2020 (Baker Hughes) < The U.S. needs at least 500 rigs drilling for oil to hold production flat.
The figure is the lowest end-of-year total since 2005, before the shale era began
The Permian basin added two rigs, while the Denver-Julesburg, and the Eagle Ford rig count remained unchanged

The EIA reported a draw of (-) 6,065 MBbls from U.S. crude oil inventories for the week ending December 25, well above the estimate of a (-) 2,449 MBbls draw
Inventories for the U.S. are now at a surplus of 52.11 MMBbls to last year and a surplus of 42.30 MMBbls to the five-year average < Compare to the more than 14 million barrels per day that is processed by U.S. refiners.

Natural Gas

he EIA is expected to report a 123 Bcf withdrawal for the week ending December 25, which would be greater than the 87 Bcf draw in the corresponding week of last year and the five year average draw of 102 Bcf
Analysts estimates ranged from a draw of 107 Bcf to 135 Bcf
A draw within this range would bring total stocks near 3.451 Tcf and the surplus to the five-year average near 197 Bcf

A US cold snap has tightened the supply/storage balance leading into 2021
Temperatures fell 3.1 degrees on December 29, mostly in the Northeast, with a decline of 8.6 degrees that led to an uptick in demand by 3.8Bcf/d day over day
The Midwest also saw a bump in demand of by 1.9 Bcf/d day over day

[dan_s]

As you can see here https://weather.com/maps/ustemperaturemap today's weather is burning up a lot of natural gas. My WAG is that the draw from storage for the week ending Jan 1st will be 30 to 40 Bcf above the 5-year average. Falling U.S. gas production and increasing gas exports are more than offsetting the lower space heating and industrial demand.

[dan_s]

Closing Prices:
> WTI prompt month (FEB 21) was up $0.12 on the day, to settle at $48.52/Bbl.
> Also, NG prompt month (FEB 21) was up $0.117 on the day, to settle at $2.539/MMBtu.