Opening Prices:
> WTI is up $1.36 to $86.96/Bbl, and Brent is up $1.45 to $89.65/Bbl.
> Natural gas is up 31.6c to $4.369/MMBtu.
AEGIS Notes
Oil
Brent crude edged closer to $90/Bbl after a broad market rally and an industry report showing a draw in U.S. oil stockpiles
> The global benchmark (Brent) rose 1.64% Wednesday morning to the highest since 2014
> Governmental oil inventories are due later today; if a stock draw is confirmed, it would be the eighth decline in nine weeks
OPEC and its allies are expected to stick with their plan to rubber-stamp another modest production increase next week, according to delegates (Bloomberg)
> The cartel has stuck to its schedule for gradual monthly supply increases since cementing the agreement in July
> AEGIS notes that even if OPEC decides to hike production by another 400 MBbl/d in March, the group has so far been unable to pump to its full quota. According to our estimates, OPEC+ was about 700 MBbl/d below their quota as of December < I told you so!
Natural Gas
U.S. natural gas futures are up this morning, with the prompt contract trading 31.6c higher near $4.369
> Overnight weather models shifted colder, particularly for the 11-15 day range. The February gas weighted heating-degree day count increased by 18.0 to 772, its highest mark yet
> U.S. LNG feedgas demand is back above 13 Bcf/d as Freeport LNG has ramped back up to 2.2 Bcf/d
> Natural gas prices in Europe are back over $30/MMBtu (The Russians are coming!)
Halliburton sees strong year ahead as E&Ps forecasted to boost CapEx
> Halliburton CEO Jeff Miller said that “North American E&P companies are set to increase capital spending by 25% in 2022, to keep pace with rising global oil and gas demand.”
> He also noted that “the North America completions market is approaching 90% utilization and Halliburton is sold out”, while prices are moving higher across the board
> AEGIS notes that the increase in CapEx will translate into more rigs being deployed as economic DUCs are probably nearing depletion. < The DUC inventory at the beginning of 2021 saved us. It won't this year.
> There needs to be a ramp-up in new drilling for the U.S. to grow or maintain production
> According to Baker Hughes, the current U.S. oil and gas rig count is at 604 vs. the pre-pandemic mark of 792 < Keep in mind that even with almost 800 active rigs in Q4 2019, U.S. oil production peaked at 12,860,000 bopd in November, 2019 and then drifted lower for four months even before the pandemic hit the U.S.
Oil & Gas Prices - Jan 26
Oil & Gas Prices - Jan 26
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - Jan 26
Pardigm Shift: The Wall Street Gang is now recommending oil & gas stocks
(Bloomberg) -- Oil is starting to look like an unlikely
haven from the stocks selloff in the run-up to anticipated Fed
tightening.
Traders are pricing lower volatility in the commodity than
in the Nasdaq and S&P 500. Barometers of market anxiety for both
indexes have shot up recently, suggesting trader sentiment is
souring. Meanwhile, the CBOE Crude Oil Volatility Index, which
measures the market’s expectation of 30-day volatility of crude
oil prices applying the VIX methodology to USO options, shows
that oil prices are expected to remain relatively muted in
comparison.
With a producer cartel to support prices, the outlook for
oil is more sanguine, even if the Fed raises rates. The
commodity has ample support, with global oil demand expected to
reach pre-pandemic levels by the end of this year. The U.S.
administration has been pushing oil-producing nations under the
OPEC+ cartel to ramp up output, while the group has stuck to a
modest production-increase plan and is expected to rubber-stamp
another 400k b/d output hike when they meet next week. This
means that oil is likely to stay a lot more stable than in
recent years. < I believe the really big Paradigm Shift comes when it sinks in that OPEC+ is already out of spare capacity.
The relatively low correlation between the asset classes
provide diversification benefits. The relationship between the S&P
500 and the global oil benchmark is weak and lacks conviction;
it’s even weaker between the Nasdaq 100 and Brent crude
contracts. The divergence in price action this week could
indicate that stocks have been tumbling in fear of a hawkish
Fed, more so than geopolitical risk alone. That would perhaps
offer traders an opportunity to seek shelter amid stock
volatility in anticipation of the Fed’s next move.
Oil might have tracked the decline in stocks at the
beginning of this week, but the commodity is back to its highs
now. It’s up close to 15% this year, while the S&P 500 is
struggling to reclaim its footing after plunging as much as 10%.
(Bloomberg) -- Oil is starting to look like an unlikely
haven from the stocks selloff in the run-up to anticipated Fed
tightening.
Traders are pricing lower volatility in the commodity than
in the Nasdaq and S&P 500. Barometers of market anxiety for both
indexes have shot up recently, suggesting trader sentiment is
souring. Meanwhile, the CBOE Crude Oil Volatility Index, which
measures the market’s expectation of 30-day volatility of crude
oil prices applying the VIX methodology to USO options, shows
that oil prices are expected to remain relatively muted in
comparison.
With a producer cartel to support prices, the outlook for
oil is more sanguine, even if the Fed raises rates. The
commodity has ample support, with global oil demand expected to
reach pre-pandemic levels by the end of this year. The U.S.
administration has been pushing oil-producing nations under the
OPEC+ cartel to ramp up output, while the group has stuck to a
modest production-increase plan and is expected to rubber-stamp
another 400k b/d output hike when they meet next week. This
means that oil is likely to stay a lot more stable than in
recent years. < I believe the really big Paradigm Shift comes when it sinks in that OPEC+ is already out of spare capacity.
The relatively low correlation between the asset classes
provide diversification benefits. The relationship between the S&P
500 and the global oil benchmark is weak and lacks conviction;
it’s even weaker between the Nasdaq 100 and Brent crude
contracts. The divergence in price action this week could
indicate that stocks have been tumbling in fear of a hawkish
Fed, more so than geopolitical risk alone. That would perhaps
offer traders an opportunity to seek shelter amid stock
volatility in anticipation of the Fed’s next move.
Oil might have tracked the decline in stocks at the
beginning of this week, but the commodity is back to its highs
now. It’s up close to 15% this year, while the S&P 500 is
struggling to reclaim its footing after plunging as much as 10%.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - Jan 26
WTI is up to $87.68/bbl at the time of this post.
Trading Economics:
WTI crude futures extended gains to above $87 a barrel on Wednesday, the highest since October 2014 in line with a broader market recovery and as investors remain concerned about supply and possible energy disruptions if Russia invades Ukraine. In the US, EIA data showed US crude inventories unexpectedly increased for a second straight week but crude stocks at the Cushing, Oklahoma delivery hub edged down. Meanwhile, OPEC+ is likely to stick with the existing policy and raise the March crude output by 400K bpd when it meets next week, Reuters reported.
BE CLEAR: OPEC+ is very close to being completely out of spare capacity.
Trading Economics:
WTI crude futures extended gains to above $87 a barrel on Wednesday, the highest since October 2014 in line with a broader market recovery and as investors remain concerned about supply and possible energy disruptions if Russia invades Ukraine. In the US, EIA data showed US crude inventories unexpectedly increased for a second straight week but crude stocks at the Cushing, Oklahoma delivery hub edged down. Meanwhile, OPEC+ is likely to stick with the existing policy and raise the March crude output by 400K bpd when it meets next week, Reuters reported.
BE CLEAR: OPEC+ is very close to being completely out of spare capacity.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group