Oil & Gas Prices - August 13
Posted: Fri Aug 13, 2021 8:50 am
Opening Prices:
> WTI is down 29c to $68.80/Bbl, and Brent is down 22c to $71.09/Bbl. < All of my forecast/valuation model are based on WTI averaging $70/bbl for the 3rd quarter. We are about half way through the quarter and so far the average price is ~$71/bbl.
> Natural gas is down 3.5c to $3.898/MMBtu. < All of my forecast/valuation models are based on HH gas averaging $3.50/MMBtu for the 3rd quarter and $3.75/MMBtu for Q4. So far in Q3, HH gas has averaged more than $3.70.
AEGIS Notes
Oil
Crude prices were volatile this week as the delta variant continues to cloud the demand recovery
Analysts are mixed on how this new Covid-19 wave will impact oil consumption (Bloomberg)
The IEA reduced its demand estimates for the rest of the year at the same time Goldman Sachs sees a more temporary impact on consumption < IEA's 100,000 barrel per day reduction in their global oil demand forecast is a rounding error in a world that consumes close to 100 million barrels per day of oil based products.
OPEC+ is unlikely to heed the recent call by the US to boost oil output (Goldman, Rueters) < Russia and Saudi Arabia are still laughing.
> Higher gasoline prices in the US sparked Joe Biden’s administration on Wednesday to urge OPEC to increase output
> “We don’t see the recent White House statement as threatening the current market deficit nor the pace of the rebalancing in 2H21", Goldman Sachs said in a note Thursday
> The IB bank did note that an additional hike in OPEC+ production by the end of the year is required to counter recent supply disappointments globally and expects OPEC+ spare capacity to be normalized by spring of 2022 (Reuters) < IEA's report assumes that US oil production will be back to 2019 level by the end of 2022. I will be stunned if that happens. Despite a doubling of the number of rigs drilling for oil, US oil production has been flat since November 2020. It will take a period of much higher oil prices to get upstream public companies to significantly increase their drilling programs. Plus, except for the Permian Basin, the other US oil basins are on decline.
Natural Gas
Natural gas futures are headed for their largest weekly loss since February < But still much higher than I expected them to be at the beginning of the quarter.
The prompt-month contract is trading near its lowest level since July 20, at around $3.88. The selloff started as cooler weather forecasts emerged, and the larger-than-expected inventory build reported by the EIA reaffirmed the downward price action
The selloff extended beyond the front-month contract, as the winter 2021-2022 strip is also trading 22c lower on the week at $4.02. The summer 2022 strip saw a modest decline of 5c, to $3.28
The EIA reported a 49-Bcf build for the week ending July 6; the build was slightly larger than the 47-Bcf build analysts expected
Inventories for the US are now at a deficit of 548 Bcf to last year and a deficit of 178 Bcf to the five-year average
Total stocks now stand at 2.776 Tcf, which is 178 Bcf below the five-year average
The end-of-season storage number settle on ICE was at 3.510 Tcf following the latest injection report. The number has fallen from 3.6 Tcf over the last two weeks. < If we begin the winter heating season with just 3.5 Tcf in storage, just a normal winter will cause shortages in some regions.
> WTI is down 29c to $68.80/Bbl, and Brent is down 22c to $71.09/Bbl. < All of my forecast/valuation model are based on WTI averaging $70/bbl for the 3rd quarter. We are about half way through the quarter and so far the average price is ~$71/bbl.
> Natural gas is down 3.5c to $3.898/MMBtu. < All of my forecast/valuation models are based on HH gas averaging $3.50/MMBtu for the 3rd quarter and $3.75/MMBtu for Q4. So far in Q3, HH gas has averaged more than $3.70.
AEGIS Notes
Oil
Crude prices were volatile this week as the delta variant continues to cloud the demand recovery
Analysts are mixed on how this new Covid-19 wave will impact oil consumption (Bloomberg)
The IEA reduced its demand estimates for the rest of the year at the same time Goldman Sachs sees a more temporary impact on consumption < IEA's 100,000 barrel per day reduction in their global oil demand forecast is a rounding error in a world that consumes close to 100 million barrels per day of oil based products.
OPEC+ is unlikely to heed the recent call by the US to boost oil output (Goldman, Rueters) < Russia and Saudi Arabia are still laughing.
> Higher gasoline prices in the US sparked Joe Biden’s administration on Wednesday to urge OPEC to increase output
> “We don’t see the recent White House statement as threatening the current market deficit nor the pace of the rebalancing in 2H21", Goldman Sachs said in a note Thursday
> The IB bank did note that an additional hike in OPEC+ production by the end of the year is required to counter recent supply disappointments globally and expects OPEC+ spare capacity to be normalized by spring of 2022 (Reuters) < IEA's report assumes that US oil production will be back to 2019 level by the end of 2022. I will be stunned if that happens. Despite a doubling of the number of rigs drilling for oil, US oil production has been flat since November 2020. It will take a period of much higher oil prices to get upstream public companies to significantly increase their drilling programs. Plus, except for the Permian Basin, the other US oil basins are on decline.
Natural Gas
Natural gas futures are headed for their largest weekly loss since February < But still much higher than I expected them to be at the beginning of the quarter.
The prompt-month contract is trading near its lowest level since July 20, at around $3.88. The selloff started as cooler weather forecasts emerged, and the larger-than-expected inventory build reported by the EIA reaffirmed the downward price action
The selloff extended beyond the front-month contract, as the winter 2021-2022 strip is also trading 22c lower on the week at $4.02. The summer 2022 strip saw a modest decline of 5c, to $3.28
The EIA reported a 49-Bcf build for the week ending July 6; the build was slightly larger than the 47-Bcf build analysts expected
Inventories for the US are now at a deficit of 548 Bcf to last year and a deficit of 178 Bcf to the five-year average
Total stocks now stand at 2.776 Tcf, which is 178 Bcf below the five-year average
The end-of-season storage number settle on ICE was at 3.510 Tcf following the latest injection report. The number has fallen from 3.6 Tcf over the last two weeks. < If we begin the winter heating season with just 3.5 Tcf in storage, just a normal winter will cause shortages in some regions.