Opening Prices:
> WTI is up $0.92 to $103.48/bbl, and Brent is up $0.80 to $108.05/bbl.
> Natural gas is up 7.4c to $7.25/MMBtu.
AEGIS Notes
Oil
India is absorbing shunned Russian oil despite warnings from the U.S. (Bloomberg)
> The Asian nation is snapping up every major grade from Russia
> State-run oil refineries are actively negotiating private deals with Russia instead of buying through public tenders in order to get better pricing
> AEGIS notes that many analysts have reduced their estimates for how much Russian crude will be lost in the coming months in the global market as Asian consumers appear to be willing buyers
Offshore U.S. crude grades rise to a four-week high amid a pickup in Gulf refinery buying (BBG)
> Mars blend was +40c to 30c/Bbl under WTI; the smallest discount since March 2
> Gulf grades Poseidon, Thunder Horse, and Southern Green Canyon, were also trading at the smallest discount since early March
Natural Gas
U.S. natural gas futures are up by 7.4c, near $7.25 this morning
> This morning's early-cycle nominations show production down by 1.2 Bcf/d to 93.42 Bcf/d
> The fall in production can largely be blamed on the Appalachian region, which fell by 784 MMcf/d
> LNG feedgas demand is at around 12.67 MMcf/d. Flows to LNG facilities have been under 13 Bcf/d, as Freeport LNG capacity has been down by around 650 MMcf/d since April 3 due to maintenance but will be back to normal operations tomorrow
> AEGIS notes that there will likely be more maintenance in the coming weeks that will limit LNG feedgas demand
> The forecasted gas-weighted heating degree day total increased by 6 HDDs to 372 HDDs, its highest mark yet < Still talking about "heating degree days" on April 20 tells me that at the end of April the ngas storage deficit to the 5-year average could be more than 350 Bcf.
Several buyers of Russian gas have agreed to pay in Roubles, according to Russian Deputy PM
> Armenia made several payments for supplies of Russian natural gas in roubles, its Economy Minister Vagan Kerobyan said in an interview with Russian media outlet RBC on Friday
> Putin has warned Europe it risked having gas supplies cut unless it pays in the Russian currency as he seeks to retaliate over the sanctions. In March, he proposed that energy buyers open accounts at Gazprombank, where payments in euros or dollars would be converted to roubles
Europe is screwed if Putin cuts off their oil and gas.
Oil & Gas Prices - April 20
Oil & Gas Prices - April 20
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - April 20
The Energy Report: Ducks In A Row
By Phil Flynn (Apr 20, 2022 10:08AM ET)< Before the EIA's Weekly Petroleum Report that shows an 8 million bbl decline in U.S. commercial crude oil inventories.
My comments are in blue below.
Oil prices got hit hard yesterday on hawkish comments by Fed Governor James Bullard and a subpar growth forecast from the IMF. Today the oil market is starting to recover on a very bullish American Petroleum Institute (API) supply data report and the fact that the market is also starting to worry about the ability of U.S. oil and gas producers to raise U.S. oil and gas production markedly.
Not only does releasing oil from global strategic reserves reduce the incentive to produce more oil and gas, they are facing a hostile environment from the Biden administration which has done everything it can to hurt the U.S. oil and gas industry.
Logistic problems that are being enhanced by bad policy could leave U.S. oil and gas output falling far short of its real potential. One indicator of future oil production that is not looking good is drilled but uncompleted wells. The DUC’s, pronounced “ducks” as they are called, according to Tim Dallinger, are at the lowest level on record. This comes as the API reported a whopping 4.496 million barrel drop in weekly crude supply despite a 4.7-million-barrel release from the SPR. The API also reported that distillate supply fell by 1.652 million barrels and gasoline supply increased by 2.933 million barrels. < U.S. oil production increased in 2021 only because we were completing 150 to 200 more wells per month than we were drilling. The "Good DUCs" have all been completed by now.
At the same time, during the Halliburton (NYSE:HAL) earnings call, it was pointed out that they are stretched to the limit when it comes to oil services. They said: “We see market tightness across all service segments. In the first quarter, the average U.S. rig count increased 14% sequentially and is up 62% year-on-year. Additionally, frac activity surged in March after winter weather, and supply chain disruptions occurred earlier in the quarter. Halliburton’s hydraulic fracturing fleet remains sold out, and the overall market appears all but sold out for the second half of the year.” < This is bullish for Solaris Oilfield Infrastructure (SOI), an oilfield services company in our Small-Cap Growth Portfolio.
Bloomberg News is pointing out that oil released from the U.S. reserve, in many cases, will be exported by the U.S. as refiners around the world are short heavy oil. There is an ever-widening search for crude to replace Russian cargoes seven weeks after President Vladimir Putin’s invasion of Ukraine triggered international revulsion and sanctions. With the global oil benchmark (Brent) trading above $110 a barrel, traders and refiners also are trying to cope with a cutoff of Libya’s most significant source of crude and little expansion in U.S. output.
Along with several allies, Joe Biden recently offered a portion of their strategic reserves for sale to help alleviate some of the supply pinch associated with the escalating war in Ukraine. According to a person familiar with the matter, a tanker known as the Advantage Spring, loaded low-sulfur crude originally pumped from the strategic reserve caverns in Southwest Louisiana at a port in Nederland, Texas, earlier this month. The ship, chartered by an affiliate of French energy giant Total Energies SE, is bound for the key European port of Rotterdam, according to ship-tracking data compiled by Bloomberg. Total Energies didn’t respond to a request for comment, according to Bloomberg.
While the Biden administration is looking to grant waivers of e-15 this summer, there are growing fears of food and corn shortages. Zerohedge reports that about one-third of Ukraine’s farmlands may not be harvested or cultivated this year as Russia begins the second phase of the conflict in the war-torn country. The Food and Agriculture Organization of the United Nations (FAO) noted in a report on Tuesday that the “vast destruction of crops and infrastructure due to the war jeopardizes food production.” < Putting even more corn based ethanal in our gasoline = less food and higher food prices for Americans.
FAO estimates approximately 33% of the crops and agricultural land may not be harvested because of the escalating war.
For all those that have called me asking if gasoline prices have topped, I hate to say, do not bet on it. I will say our long product, and short crude spreads have done well despite the recent oil pullback. The Energy Information Administration EIA is also predicting higher gasoline prices.
The EIA, in their Summer Fuels Outlook, expects that retail gasoline prices will average $3.84 per gallon (gal) this summer driving season, April through September, compared with last summer’s average price of $3.06/gal. After adjusting for inflation, this summer’s forecast national average price would mark the highest retail gasoline and diesel prices since 2014. < I will be stunned if gasoline prices average under $4/gallon.
They expect the ongoing effects of the COVID-19 pandemic will have a smaller effect on gasoline and diesel consumption in the United States during the 2022 summer season compared with the past two summers. U.S. gasoline and diesel consumption continue to remain below their 2019 averages. EIA expects higher fuel prices this summer because of higher crude oil prices. Crude oil prices have generally risen since the start of the year partly because of geopolitical developments, particularly Russia’s war against Ukraine.
The EIA expects U.S. economic activity to increase through the summer, resulting in more demand for petroleum fuels. Greater demand will contribute to higher crude oil prices. We expect Brent crude oil will average $106 per barrel this summer, which would be $35/bbl higher than last summer.
Recently, increased volatility of crude oil prices, which account for around 60% of total retail gasoline prices, indicates our crude oil price forecast could change depending on several factors that remain highly uncertain. Notably, our outlook considers all sanctions on Russia announced as of April 7, but the range of possible outcomes for resulting oil production in Russia is wide.
Natural gas looks like a blow-off top but do not be fooled because the long-term fundamentals are still very bullish. If you missed it, this might be the time to lock in summer strategies and hedges. Bloomberg News agrees.
They said that a surge in demand had supercharged the rally — from an unusually chilly spring that stoked heating needs to a spike in exports as Europe tries to wean itself off Russian gas amid the war in Ukraine. That cut U.S. inventories to almost 20% below typical levels. At the same time, traders are staring down forecasts for a hotter-than-normal summer that will almost certainly bolster demand for gas to generate electricity as air conditioners get cranked higher. But what’s really getting the bulls excited is that the market has lost much of its ability to curb consumption through higher prices.
In the past, when natural gas became too expensive, power-plant owners would just dial down some of their gas-fired generators and turn up those burning coal, effectively putting a ceiling on demand and preventing prices from skyrocketing. But utilities’ move away from coal is shrinking inventories and drastically reducing their ability to pivot from gas, leaving the market more vulnerable to wild moves. “There is a path to some crazy prices,” said Paul Phillips, senior strategist at Uplift Energy Strategy in Denver. < I agree with Paul. If we get to the end of May and natural gas in storage is more than 300 Bcf below the 5-year average, we will be one heat wave away from $10/MMBtu HH gas prices.
Crazy prices will only add to the pain consumers are already suffering from annual inflation that reached 8.5% last month. Energy costs have climbed even faster: Electricity surged 11% over the past 12 months, largely because of increased costs for the gas used to generate power, while gas used to heat homes and for cooking jumped 22% in that span, according to the U.S. Bureau of Labor Statistics.
Those increases don’t reflect the 24% surge in gas futures just this month, which extended their advance this year to about 90% — the biggest gain among U.S.-traded commodities. Eli Rubin, a senior energy analyst at EBW AnalyticsGroup, explained: ”Natural gas prices are often the input to the economy at large, that’s likely to carry over into higher prices for everything from fuel to food and power.”
By Phil Flynn (Apr 20, 2022 10:08AM ET)< Before the EIA's Weekly Petroleum Report that shows an 8 million bbl decline in U.S. commercial crude oil inventories.
My comments are in blue below.
Oil prices got hit hard yesterday on hawkish comments by Fed Governor James Bullard and a subpar growth forecast from the IMF. Today the oil market is starting to recover on a very bullish American Petroleum Institute (API) supply data report and the fact that the market is also starting to worry about the ability of U.S. oil and gas producers to raise U.S. oil and gas production markedly.
Not only does releasing oil from global strategic reserves reduce the incentive to produce more oil and gas, they are facing a hostile environment from the Biden administration which has done everything it can to hurt the U.S. oil and gas industry.
Logistic problems that are being enhanced by bad policy could leave U.S. oil and gas output falling far short of its real potential. One indicator of future oil production that is not looking good is drilled but uncompleted wells. The DUC’s, pronounced “ducks” as they are called, according to Tim Dallinger, are at the lowest level on record. This comes as the API reported a whopping 4.496 million barrel drop in weekly crude supply despite a 4.7-million-barrel release from the SPR. The API also reported that distillate supply fell by 1.652 million barrels and gasoline supply increased by 2.933 million barrels. < U.S. oil production increased in 2021 only because we were completing 150 to 200 more wells per month than we were drilling. The "Good DUCs" have all been completed by now.
At the same time, during the Halliburton (NYSE:HAL) earnings call, it was pointed out that they are stretched to the limit when it comes to oil services. They said: “We see market tightness across all service segments. In the first quarter, the average U.S. rig count increased 14% sequentially and is up 62% year-on-year. Additionally, frac activity surged in March after winter weather, and supply chain disruptions occurred earlier in the quarter. Halliburton’s hydraulic fracturing fleet remains sold out, and the overall market appears all but sold out for the second half of the year.” < This is bullish for Solaris Oilfield Infrastructure (SOI), an oilfield services company in our Small-Cap Growth Portfolio.
Bloomberg News is pointing out that oil released from the U.S. reserve, in many cases, will be exported by the U.S. as refiners around the world are short heavy oil. There is an ever-widening search for crude to replace Russian cargoes seven weeks after President Vladimir Putin’s invasion of Ukraine triggered international revulsion and sanctions. With the global oil benchmark (Brent) trading above $110 a barrel, traders and refiners also are trying to cope with a cutoff of Libya’s most significant source of crude and little expansion in U.S. output.
Along with several allies, Joe Biden recently offered a portion of their strategic reserves for sale to help alleviate some of the supply pinch associated with the escalating war in Ukraine. According to a person familiar with the matter, a tanker known as the Advantage Spring, loaded low-sulfur crude originally pumped from the strategic reserve caverns in Southwest Louisiana at a port in Nederland, Texas, earlier this month. The ship, chartered by an affiliate of French energy giant Total Energies SE, is bound for the key European port of Rotterdam, according to ship-tracking data compiled by Bloomberg. Total Energies didn’t respond to a request for comment, according to Bloomberg.
While the Biden administration is looking to grant waivers of e-15 this summer, there are growing fears of food and corn shortages. Zerohedge reports that about one-third of Ukraine’s farmlands may not be harvested or cultivated this year as Russia begins the second phase of the conflict in the war-torn country. The Food and Agriculture Organization of the United Nations (FAO) noted in a report on Tuesday that the “vast destruction of crops and infrastructure due to the war jeopardizes food production.” < Putting even more corn based ethanal in our gasoline = less food and higher food prices for Americans.
FAO estimates approximately 33% of the crops and agricultural land may not be harvested because of the escalating war.
For all those that have called me asking if gasoline prices have topped, I hate to say, do not bet on it. I will say our long product, and short crude spreads have done well despite the recent oil pullback. The Energy Information Administration EIA is also predicting higher gasoline prices.
The EIA, in their Summer Fuels Outlook, expects that retail gasoline prices will average $3.84 per gallon (gal) this summer driving season, April through September, compared with last summer’s average price of $3.06/gal. After adjusting for inflation, this summer’s forecast national average price would mark the highest retail gasoline and diesel prices since 2014. < I will be stunned if gasoline prices average under $4/gallon.
They expect the ongoing effects of the COVID-19 pandemic will have a smaller effect on gasoline and diesel consumption in the United States during the 2022 summer season compared with the past two summers. U.S. gasoline and diesel consumption continue to remain below their 2019 averages. EIA expects higher fuel prices this summer because of higher crude oil prices. Crude oil prices have generally risen since the start of the year partly because of geopolitical developments, particularly Russia’s war against Ukraine.
The EIA expects U.S. economic activity to increase through the summer, resulting in more demand for petroleum fuels. Greater demand will contribute to higher crude oil prices. We expect Brent crude oil will average $106 per barrel this summer, which would be $35/bbl higher than last summer.
Recently, increased volatility of crude oil prices, which account for around 60% of total retail gasoline prices, indicates our crude oil price forecast could change depending on several factors that remain highly uncertain. Notably, our outlook considers all sanctions on Russia announced as of April 7, but the range of possible outcomes for resulting oil production in Russia is wide.
Natural gas looks like a blow-off top but do not be fooled because the long-term fundamentals are still very bullish. If you missed it, this might be the time to lock in summer strategies and hedges. Bloomberg News agrees.
They said that a surge in demand had supercharged the rally — from an unusually chilly spring that stoked heating needs to a spike in exports as Europe tries to wean itself off Russian gas amid the war in Ukraine. That cut U.S. inventories to almost 20% below typical levels. At the same time, traders are staring down forecasts for a hotter-than-normal summer that will almost certainly bolster demand for gas to generate electricity as air conditioners get cranked higher. But what’s really getting the bulls excited is that the market has lost much of its ability to curb consumption through higher prices.
In the past, when natural gas became too expensive, power-plant owners would just dial down some of their gas-fired generators and turn up those burning coal, effectively putting a ceiling on demand and preventing prices from skyrocketing. But utilities’ move away from coal is shrinking inventories and drastically reducing their ability to pivot from gas, leaving the market more vulnerable to wild moves. “There is a path to some crazy prices,” said Paul Phillips, senior strategist at Uplift Energy Strategy in Denver. < I agree with Paul. If we get to the end of May and natural gas in storage is more than 300 Bcf below the 5-year average, we will be one heat wave away from $10/MMBtu HH gas prices.
Crazy prices will only add to the pain consumers are already suffering from annual inflation that reached 8.5% last month. Energy costs have climbed even faster: Electricity surged 11% over the past 12 months, largely because of increased costs for the gas used to generate power, while gas used to heat homes and for cooking jumped 22% in that span, according to the U.S. Bureau of Labor Statistics.
Those increases don’t reflect the 24% surge in gas futures just this month, which extended their advance this year to about 90% — the biggest gain among U.S.-traded commodities. Eli Rubin, a senior energy analyst at EBW AnalyticsGroup, explained: ”Natural gas prices are often the input to the economy at large, that’s likely to carry over into higher prices for everything from fuel to food and power.”
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - April 20
The "noise" level is very high, but WTI seems to have some support around $102/bbl.
Trading Economics:
"WTI crude futures bottomed around $101 per barrel, a dramatic reversal from its daily highs of $104 as investors weighted a weakening global economic outlook and concerns about subdued demand in top consumer China against tighter supplies from Russia and Libya. The IMF and the Global Bank slashed their forecast for world economic growth following Russia’s invasion of Ukraine. At the same time, renewed coronavirus-induced lockdowns in China clouded the demand outlook in the world’s top crude importer. Putting a floor under prices were supplies disruptions from Libya because of a wave of protests and the potential for an EU ban on Russian oil. Meanwhile, EIA data showed that the US crude oil inventories tumbled 8.02 million barrels to 413.7 million barrels last week, the most since January 2021."
At the time of this post, WTI was trading at $102.56. All of my forecast models are based on WTI averaging $100/bbl in Q2.
Trading Economics:
"WTI crude futures bottomed around $101 per barrel, a dramatic reversal from its daily highs of $104 as investors weighted a weakening global economic outlook and concerns about subdued demand in top consumer China against tighter supplies from Russia and Libya. The IMF and the Global Bank slashed their forecast for world economic growth following Russia’s invasion of Ukraine. At the same time, renewed coronavirus-induced lockdowns in China clouded the demand outlook in the world’s top crude importer. Putting a floor under prices were supplies disruptions from Libya because of a wave of protests and the potential for an EU ban on Russian oil. Meanwhile, EIA data showed that the US crude oil inventories tumbled 8.02 million barrels to 413.7 million barrels last week, the most since January 2021."
At the time of this post, WTI was trading at $102.56. All of my forecast models are based on WTI averaging $100/bbl in Q2.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - April 20
Closing Prices:
> Prompt-Month WTI (May 22) was up $0.19 on the day, to settle at $102.75
> Prompt-Month Henry Hub (May 22) was down $-0.239 on the day, to settle at $6.937 < Gas prices got a bit ahead of the fundamentals, so the pullback seems justified. Thursday's storage report should be helpful as I expect the build for the week ending April 15th to be below the 5-year average build of 38 Bcf.
> Prompt-Month WTI (May 22) was up $0.19 on the day, to settle at $102.75
> Prompt-Month Henry Hub (May 22) was down $-0.239 on the day, to settle at $6.937 < Gas prices got a bit ahead of the fundamentals, so the pullback seems justified. Thursday's storage report should be helpful as I expect the build for the week ending April 15th to be below the 5-year average build of 38 Bcf.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group