Oil & Gas Prices - April 14

[dan_s]

Opening Prices:
> WTI is up 75c to $60.93/Bbl, and Brent is up 92c to $64.59/Bbl.
> Natural gas is up 2.7c to $2.646/MMBtu.

AEGIS Notes
Oil

IEA boosts U.S. oil demand forecast as U.S. recovery helps clear inventories
The agency boosted estimates for this year’s growth in oil consumption by 230 MBbl/d to 5.7 MMBbl/d, equivalent to nearly 2/3 of demand lost in 2020
IEA notes that rising Iran production continues to complicate OPEC’s plan to balance the market. The country produced 2.3 MMBbl/d in March and could add 1.5 MMBbl/d if an accord is reached

Canadian imports fell 20% in 2020 due to pandemic (Reuters)
Canada imported 555 MBbl/d last year, down from 693 MBbl/d in 2019 for its lowest mark in at least the previous ten years – Canada Energy Regulator (CER)
Canada is the worlds fourth-largest oil producer and exports around 3.7 MMBbl/d

EIA weekly data is due at 9:30 am CST
U.S. Crude Inventories: – 2,580 MBbls (Avg. Bloomberg surveys) < Falling inventories will be the primary driver of oil prices. As U.S. and OECD oil inventories fall below 30 days of consumption (now expected by end of Q2), we should see WTI move over $65/bbl. The last time OECD oil inventories went below 28 days of consumption was Q1 2018, causing WTI to spike to more than $75/bbl.
U.S. Gasoline Inventories: + 555 MBbls
U.S. Distillate Inventories: + 1,510 MBbls
U.S. Refinery Utilization: + 0.33% change < Key stat in the weekly EIA reports. We need refinery utilization to top 90% in Q2. That will steady and large declines in U.S. crude oil inventories. From Q1 to Q3 global demand for refined products increases by 2 to 3 million barrels per day.

Natural Gas

Cash prices for Dominion South (Dom S.) are at the lowest for April in at least the last five years
So far this month, Dom S. has averaged a 63c discount to Henry Hub
Shoulder months in Spring and Fall can often bring lower prices to the Appalachian pricing points as supply can test the region’s egress capacity
According to PointLogic data, the Marcellus and Utica shales have averaged production over 33.6 Bcf/d so far this month – up about 500 MMcf/d from the same period in 2020
According to Platts, interstates transporting Appalachian supply to the Southeast are about 96% utilized this month, compared to 89% last April

US natural gas inventories likely rose by 67 Bcf for the week ended April 9, according to the Bloomberg survey of economist
This would be more than double the five-year average
If the EIA confirms a 67 Bcf net addition to storage tomorrow, the deficit to the five-year average would flip to a 15 Bcf surplus, while the deficit to 2020 would rise to 238 Bcf < We should see it flip back to a deficit over the next two weeks as weather has turned colder and the 5-year average builds are larger.

[dan_s]

Closing Prices:
> WTI prompt month (MAY 21) was up $2.97 on the day, to settle at $63.15/Bbl.
> NG prompt month (MAY 21) was down $0.001 on the day, to settle at $2.618/MMBtu.

MY TAKE: During April and May we are going to see a big decline in crude oil inventories.