AEGIS Notes - July 19
Posted: Mon Jul 19, 2021 11:38 am
The AEGIS notes came later today.
Oil Market:
Brent crude traded down to the lowest level in five weeks Monday morning after OPEC+ makes a deal and a coronavirus surge threatens the demand recovery
< OPEC+ has agreed to increase production into 2022 while readjusting certain member quotas
> The delta variant coronavirus has surged in Asia, helping drive equities lower (Bloomberg)
> The US dollar is also on the rise, putting downward pressure on oil prices
OPEC and its allies have agreed to add 400 MBbl/d each month from August until all previously held back production is revived
> The deal comes ahead of the lengthy Islamic holiday and allows monthly supply hikes next month.
> If OPEC waited much longer, it was more likely that a supply cut would only come as early as September
> The UAE was able to compromise and was able to increase its quota starting in May of 2022 (Reuters).
> Interestingly, but perhaps not surprising, Saudi Arabia and Russia were also allowed to increase their quota’s next year as well
U.S. Natural Gas:
The prompt-month Henry Hub contract is up 9.5c this morning as warmer weather forecasts shaped up over the weekend
> Weather in the Northwest and Midwest is expected to heat up in the 5-10 day range, while the U.S. Northeast is expected to see more mild temperatures
> The total number of U.S. gas-weighted degree days for July increase by 4.3 CDDs over the weekend
> The Southern California Gas city-gate price has rebounded strongly as gas demand offsets lower power imports (Platts)
> The balance of the SoCal CG Summer ’21 strip price reached $6.47/MMBtu on Friday, up from an average of around $6/MMBtu during the week ending July 9 < This is what happens in the regional markets when the physical gas market tightens and utilities are forced to bid against each other for gas supply. I expect this to be the case in most regions in Q4.
The recent drop in Southern California gas storage levels has likely contributed to the stronger forward pricing
The Southern California gas system faced several days of net withdrawals during the week ending July 9, which helped bring storage from a YTD high of 77.5 Bcf to 76 Bcf on July 13. Gas needed to be pulled from inventories to meet rising gas-fired power generation demand.
The un-seasonal drop in storage can be attributed to lower power imports. As Oregon and other state neighbors deal with wildfire conditions, their ability to send power long distances is dampened
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Keep in mind that all of the upstream companies produce a combination of oil, gas and NGLs. We do have several companies that are close to pure "gassers". CRK and GDP have very low volumes of liquids and they get very good prices for their dry Haynesville gas.
You can find each company's production mix at the bottom of the forecast models on our website.
Oil Market:
Brent crude traded down to the lowest level in five weeks Monday morning after OPEC+ makes a deal and a coronavirus surge threatens the demand recovery
< OPEC+ has agreed to increase production into 2022 while readjusting certain member quotas
> The delta variant coronavirus has surged in Asia, helping drive equities lower (Bloomberg)
> The US dollar is also on the rise, putting downward pressure on oil prices
OPEC and its allies have agreed to add 400 MBbl/d each month from August until all previously held back production is revived
> The deal comes ahead of the lengthy Islamic holiday and allows monthly supply hikes next month.
> If OPEC waited much longer, it was more likely that a supply cut would only come as early as September
> The UAE was able to compromise and was able to increase its quota starting in May of 2022 (Reuters).
> Interestingly, but perhaps not surprising, Saudi Arabia and Russia were also allowed to increase their quota’s next year as well
U.S. Natural Gas:
The prompt-month Henry Hub contract is up 9.5c this morning as warmer weather forecasts shaped up over the weekend
> Weather in the Northwest and Midwest is expected to heat up in the 5-10 day range, while the U.S. Northeast is expected to see more mild temperatures
> The total number of U.S. gas-weighted degree days for July increase by 4.3 CDDs over the weekend
> The Southern California Gas city-gate price has rebounded strongly as gas demand offsets lower power imports (Platts)
> The balance of the SoCal CG Summer ’21 strip price reached $6.47/MMBtu on Friday, up from an average of around $6/MMBtu during the week ending July 9 < This is what happens in the regional markets when the physical gas market tightens and utilities are forced to bid against each other for gas supply. I expect this to be the case in most regions in Q4.
The recent drop in Southern California gas storage levels has likely contributed to the stronger forward pricing
The Southern California gas system faced several days of net withdrawals during the week ending July 9, which helped bring storage from a YTD high of 77.5 Bcf to 76 Bcf on July 13. Gas needed to be pulled from inventories to meet rising gas-fired power generation demand.
The un-seasonal drop in storage can be attributed to lower power imports. As Oregon and other state neighbors deal with wildfire conditions, their ability to send power long distances is dampened
-----------------------------------
Keep in mind that all of the upstream companies produce a combination of oil, gas and NGLs. We do have several companies that are close to pure "gassers". CRK and GDP have very low volumes of liquids and they get very good prices for their dry Haynesville gas.
You can find each company's production mix at the bottom of the forecast models on our website.