Oil & Gas Prices - Mar 10

[dan_s]

Opening Prices: "The Roller Coaster Ride continues"
> WTI is up $5.68 to $114.38/bbl, and Brent is up $6.71 to $117.85/bbl.
> Natural gas is up 3.1c to $4.557/MMBtu.

AEGIS Notes
Oil

Oil prices are up nearly 5% this morning after slumping the most in almost two years yesterday
> Yesterday’s sharp $16/Bbl selloff in Brent was partly attributed to calls from the United Arab Emirates to boost output faster than planned
> That statement from the UAE was tempered later in the day by the nation’s energy minister
> “OPEC+ will have to jump through many hoops to agree to deviate from its current road map,” said Vandana Hari, the founder of Singapore-based Vanda Insights

Brent crude could surge to $240/Bbl this summer if Western countries continue to sanction Russia oil exports, according to industry consultants Rystad Energy
> Further sanctions on Russian oil would create an over 4 MMBbl/d hole that “cannot simply be replaced by other sources of supply,” Rystad Energy’s head of oil markets, Bjornar Tonhaugen, wrote in a note (Bloomberg)
> The higher prices rise, the higher the “chances of the global economy entering a recession” in the fourth quarter, according to Tonhaugen

Natural Gas

The prompt-month (Apr' 22) Henry Hub contract is up by 3.1c, near $4.557 < Note that April and May are normally the months with the lowest demand for natural gas. With a storage deficit to the 5-year average of ~250 Bcf at the end of March, I expect gas prices to remain in the $4.50 to $5.50 range for the remainder of the year. My forecasts assume HH gas prices will average $4.25 this year and $4.00 in 2023.
> Lower-48 dry gas production is down by about 0.78 Bcf/d this morning, near 92.4 Bcf/d, its lowest level in weeks
> LNG feedgas demand is at 12.44 Bcf/d, with flows at Corpus Christi LNG down by 1 Bcf/d
> at Calcasieu Pass flows are around 0.6 Bcf/d, its highest mark yet
> Gas generation surged to 165 GW on Wednesday as wind-powered electricity generation fell from 70 GW to 40 GW

The European gas market is more at risk than its crude
> European gas markets have been in turmoil since last year as Russia slowed pipeline flows and as Asian demand for liquefied natural gas (LNG) surged, driving up prices across the globe
> It takes years to build terminals for liquefaction and re-gasification of the fuel, and the U.S. has been in a final investment decision (FID) lull over the last few years
> Executives at Ceraweek on Wednesday said the U.S. and Europe could build more LNG plants to meet growing demand with the cooperation and assistance of regulatory authorities

[dan_s]

Closing Prices:
> Prompt-Month Henry Hub (Apr 22) was up $0.105 on the day, to settle at $4.631
> Prompt-Month WTI (Apr 22) was down $-2.68 on the day, to settle at $106.02

MY TAKE: There is lots of "political noise" impacting oil prices. Team Biden is doing their best to "talk down" oil prices, but I don't see it working. U.S. upstream companies and OPEC are not going to rescue the world from this energy crisis. They cannot quickly replace 3-5 million barrels per day of Russian oil. Plus, we are only weeks away from the annual spike in demand for transportation fuels. U.S. and OECD petroleum inventories are dangerously low and they will keep falling. We are just at the beginning of a long period of triple digit oil prices.