Oil & Gas Prices - Dec 9

[dan_s]

Opening Prices:
> WTI is down 82c to $71.54/Bbl, and Brent is down 85c to $74.97/Bbl.
> Natural gas is down 5.9c to $3.756/MMBtu.

AEGIS Notes
Oil

Oil prices slid Thursday morning after three days of gains as investors weigh continued uncertainty surrounding the Omicron variant and its impact to fuel demand
> Lab studies by Pfizer and BioNTech show a third dose of their vaccine can neutralize Omicron
> Bloomberg reported that a study showed the Omicron variant is 4.2 times more transmissible than the delta variant in its early stages, based on data from South Africa’s Gauteng province < IMO as long as the new variant is not as deadly as the Delta Variant, which seems to be the case, it will not impact oil demand. The Delta Variant only reduced oil demand by 500,000 (~0.5% of total demand) and demand rebounded quickly in Q2 2021.

The EIA reported a draw of 241,000 Bbls in U.S. crude oil inventories for the week ended 12/3
> Analysts were expecting a larger 1.16 draw, and the API forecast a 3.08 MMBbl withdrawal when it reported on Tuesday
> The build in Cushing stocks took the headlines as the storage hub rose 2.3 MMBbl, pushing Cushing inventories above 30 MMBbl < This is still quite low for this time of year
> Earlier this year, inventory levels seemed to be on pace to slide toward what many in the market considered the minimum level needed to maintain operation (Bloomberg)

Natural Gas

The prompt-month (Jan ’22) Henry Hub contract is down by 5.9c this morning, near $3.756
> Weather models were relatively steady last night. The December gas-weighted heating degree day total fell by 1.7 HDDs to 725.6 HDDs
> Flows to Freeport LNG picked back up yesterday, helping total U.S. LNG feedgas demand return to 12.35 Bcf/d

The EIA is expected to report a 55-Bcf withdrawal for the week ending November 26, which would be smaller than the 78-Bcf draw in the corresponding week of last year, but match the five-year average
> Analysts estimates ranged from a draw of 39 Bcf to 60 Bcf
> A draw within this range would bring total stocks near 3.509 Tcf and the deficit to the five-year average unchanged at 86 Bcf
> The current end-of-season storage number settled at 1.615 Tcf on ICE, from 1.55 Tcf last Thursday

Permian shale producers warn of gas takeaway constraints in Permian
> While other U.S. oilfields are seeing production plateau, the Permian Basin is expected to continue to grow because of its low breakeven cost, which is estimated to be around $30/bbl
> At the same time, operators are under pressure from investors to reduce flaring the excess natural gas, which translates to more associated gas production
> The Permian Basin will need another pipeline to help move natural gas to market amid growing demand, according to Enterprise Product Partners CEO, Jim Teague
Keep in mind that this should not be a problem for this winter. Enterprise is just laying the groundwork to get approval for another pipeline. It is good news for our midstream companies that serve the Permian Basin.

[Fraser921]

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