Oil & Gas Prices - Oct 22

[dan_s]

Opening Prices:
> WTI is up 66c to $83.16/Bbl, and Brent is up 68c to $85.29/Bbl.
> Natural gas is up 16.6c to $5.281/MMBtu.

AEGIS Notes
Oil

West Texas Intermediate is poised for a small gain on the week following tightening Cushing stocks and high global energy prices
> This week the EIA reported another large pull on Cushing inventories, showing that stockpiles declined more than 4 MMBbl over the past two weeks to 31 MMbl. The storage tanks in Cushing, Oklahoma, require a minimum level of oil to maintain normal operations, which traders believe is around 20 MMBbl (Bloomberg).

Pricy natural gas is threatening to reduce profit for some oil refiners, forcing them to cut processing rates and alter crude-buying patterns (Bloomberg)
> Methane is essential to making hydrogen that oil refiners rely on for diesel-producing machines called hydrocrackers and hydrotreaters
> The hike might, in theory, make some refinery operations unprofitable, the IEA said
> Physical oil traders say the natural gas surge is affecting which grades refineries prefer and that some hydrocrackers in Europe may have to cut how they process
> AEGIS notes that high natural gas prices have become a double-edged sword as gains in gas-to-oil switching in the power sector can be partially offset by demand destruction in other oil-dependent industries
> This is a much bigger problem for refiners in Europe and Asia where natural gas prices are more than 5X higher than they are in the U.S.

Natural Gas

The prompt-month (Nov '21) Henry Hub contract is trading 16.6c higher, near $5.281. DEC21 is trading at $5.57 at the time of this post.
> The NOAA released its US Winter Outlook yesterday, in which they forecast warmer-than-average temperatures across the South and Eastern U.S. due to La Nina conditions. The Northwest is the only region expected to see colder-than-average temperatures
> If the NOAA forecast materializes, it would be bearish for gas prices. In our storage forecast, we see U.S. gas inventories reaching the five-year average by year-end, under warmer weather conditions
> The U.S. gas-weighted heating degree day count increased by seven, its largest increase in a week, to bring the total to 176

The EIA reported a 92-Bcf injection for the week ending October 15
> Working gas inventories increased to 3.461 Tcf, 4.2% below the five-year average of 3.612 Tcf
> The deficit to the five-year average has narrowed over the past month from about 225 Bcf to now 151 Bcf
> The ICE end-of-season inventory level is at 3.665 Tcf, its highest mark since early June

[dan_s]

Closing Prices:
> WTI prompt month (DEC 21) was up $1.26 on the day, to settle at $83.76/Bbl.
> Also, NG prompt month (NOV 21) was up $0.165 on the day, to settle at $5.280/MMBtu.

Last Look - WTI posts $1.48 weekly gain; Gas loses 13c on the week with both well above what I am using in my forecast models.