Oil & Gas Prices - Oct 5

[dan_s]

Opening Prices:
> WTI is up $1.16 to $78.78/Bbl, and Brent is up $1.36 to $82.62/Bbl.
> Natural gas is up 30.7c to $6.073/MMBtu.

AEGIS Notes
Oil

Oil prices surged to a seven-year high after OPEC+ opted to stick with its plan to increase output by 400 MBbl/d
> Many analysts were expecting OPEC and its allies to raise supply by more amid a tight oil market
> OPEC+ is in the driver's seat with oil prices as the group has over 4 MMBbl/d on the sidelines < It is my opinion that less than half of the remaining OPEC+ spare capacity can be placed online quickly. Also IMO the reason that OPEC+ is sticking with their lower than needed supply increases of just 400,000 bpd per month is that they physically can't increase the pace of increased supply. The logistics of bringing more oil to market is more complicated than turning a few valves.

Investment bank Goldman Sachs sees an extra 650,000 Bbl/d of crude demand coming later this year as utilities deal with high natural gas prices and switch to oil-fired power plants (Bloomberg)
> In an interview with Bloomberg TV, Goldman’s head of energy research Damian Courvalin said his bank estimates Brent crude futures will rise to $90/Bbl by the end of the year. < This will take WTI to ~$87/bbl.
> This winter, AEGIS notes that now multiple Wall Street banks and oil analysts see upside price-skew for oil prices.

Natural Gas

The prompt-month (Nov ’21) Henry hub contract is trading 30.7c higher this morning to approach $6.07
> U.S. dry gas production fell to 90.9 Bcf/d, its lowest level in over a month (Bloomberg)
> The production losses came primarily from the South Central and Northeast regions, falling 1.1 and 0.7 Bcf/d, respectively
> A force majeure on the Transco pipeline knocked Northeast flows to the Southeast down by 0.39 Bcf/d
> Feedgas demand at U.S. LNG facilities is also 0.5 Bcf/d lower today at 9.68 Bcf/d. The drop stems from Freeport LNG, as the site has dealt with compressor issues for the last few months
> October weather forecasts have shifted warmer over the last several days. The gas-weighted cooling degree day total has gained 10, while the heating degree-day total lost 13

Major trading houses see European natural gas prices falling in 2022
> The prompt-month TTF contract is currently trading near $32.90/MMBtu
> Gunvor and Trafigura CEO’s Torbjorn Tornqvit and Jeremy Weir forecast TTF trading around $20 and $12 in 2022 < Not if Europe has a winter like they had last year that wiped out their natural gas in storage.