Oil & Gas Prices - Feb 10

[dan_s]

Opening Prices:
> WTI is up 31c to $58.67/Bbl, and Brent is up 38c to $61.47/Bbl.
> Natural gas is down 1.1c to $2.824/MMBtu.

AEGIS Morning Notes
Crude OIl

Crude futures are up this morning, extending their longest run of gains in over two years
The world’s largest independent oil trader, Vitol Group, has said that crude prices have more room to run as global stockpiles become depleted
Oil prices have been pushed higher by declining inventories, and the reported draw of 3.5 MMBbls by API added to the positive sentiment surrounding crude prices.
The EIA will release its official storage numbers at 0930am

Vitol says oil prices have room to rise further as stockpiles shrink
Firming oil demand is reducing global inventories, with at least 500 MMbbls being pulled from storage during 1H2021, according to Vitol
The IEA said it expected inventories to fall by 100 MMBbls in 1Q2021, while OPEC has said inventories will reach their five-year-average by August

EIA weekly data is due at 9:30 am CST
U.S. Crude Inventories: – 177 MBbls (Avg. Bloomberg surveys)
U.S. Gasoline Inventories: + 1,892 MBbls
U.S. Distillate Inventories: – 1,488 MBbls
U.S. Refinery Utilization: – 0.23% change

Natural Gas

Natural gas output and demand to fall for the second year in a row according to EIA’s monthly STEO report
After averaging 91.3 Bcf/d in 2020 and an all-time high of 93.1 Bcf/d in 2019, the EIA forecasts that natural gas production will drop to 90.5 Bcf/d in 2021 and 91.0 Bcf/d in 2022
Projected U.S. power consumption will rise by 1.6% in 2021 and 1.7% in 2022 after falling 3.8% in 2020
EIA forecasts the share of electric power generated by natural gas in the U.S. to decrease from 39% in 2020 to 37% in 2021 and to 35% in 2022, conceding market share to both coal and renewables

A solid draw could potentially flip the storage from surplus to deficit for the first time in two years (Platts)
The EIA is expected to report a 175 Bcf withdrawal from storage on Thursday, according to the average Platts analyst estimate
A 175 Bcf pull would be nearly 54 Bcf more than the 121 Bcf withdrawal observed last year as well as the five-year average draw of 125 Bcf
If this injections forecast holds, the prevailing overhang to the previous year will flip to a 13 Bcf deficit, marking the first time storage volumes dropped to a deficit compared to the year previous in two years < Because of much colder weather this week, I am expecting a draw of ~260 Bcf for the week ending Feb. 12; 100 Bcf larger than the 5-year average for the week.

Fog Disrupts LNG traffic in the U.S. Gulf Coast
Traffic at LNG terminals was disrupted as heavy fog swept across the southwest Louisiana area, disrupting port operations as feed gas volumes to U.S. terminals dipped Tuesday to 10.56 Bcf from 11.28 Bcf on Monday. The lowest volume in two weeks
Foggy conditions are expected to continue through Thursday
The fog primarily affected Cheniere Energy’s Sabine Pass Liquefaction, as feedgas deliveries showed 3.4 Bcf/d on Feb. 9, down more than 666 MMcf/d from the day before (Platts)
LNG arbs narrowed as TTF was down $0.32 to $6.790 and JKM fell $0.125 to $8.305 for March deliveries

[dan_s]

From Celsius Energy
"As of 1:00 PM ET on February 10, the population-weighted nationwide temperature is 43.6°F which is 1.3°F colder than yesterday and 2.5°F colder than the historical average. Accumulated Natural Gas-Weighted Degree Days (GWDDs) through 1:00 PM EDT tally 15.3 GWDDs which is 0.3 GWDDs less than yesterday through the same time but 1.5 GWDDs greater than average. This suggests an above-average contribution of temperature to natural gas demand."

I am forecasting a BIG DRAW from ngas storage for the week ending 2/12/2021
> Colder weather than the 5-year average
> Many more homes and businesses heat with gas today than the 5-year average
> Exports are much higher
> Production is down YOY.
> Well freeze offs in Marcellus/Utica

5-year average draws for the week ending
Feb 5 : 107 Bcf
Feb 12: 160 Bcf
Feb 19: 128 Bcf
Feb 26: 75 Bcf

If February weather stays colder than normal in the Great Lakes Regions, we should see ngas storage go below the 5-year average in March. I expect draws to continue to exceed the 5-year average in March and April because of lower production and higher exports.

[dan_s]

Closing Prices:
> WTI prompt month (MAR 21) was up $0.32 on the day, to settle at $58.68/Bbl.
> NG prompt month (MAR 21) was up $0.076 on the day, to settle at $2.911/MMBtu.

The ten day forecast is SUPER BULLISH for natural gas.
Go to this website https://weather.com/maps/tendayforecast and scroll through the next ten day forecasts. Note that we may see temps way below freezing next week in Houston. BIG DRAWS from storage the next two weeks.