Oil & Gas Prices - May 4

[dan_s]

Opening Prices:
> WTI is up $4.11 to $106.52/bbl, and Brent is up $4.02 to $108.99/bbl.
> Natural gas is up 46.8c to $8.422/MMBtu.

AEGIS Notes: EU proposes a Russian crude embargo | Gas at a 13-year high

Crude Oil

EU proposes a Russian crude embargo over the next six months and refined products by the end of 2022
> Hungary and Slovakia will have exceptions until the end of 2023 to comply with sanctions
> EU Commission President Ursula von der Leyen maintained expectations to secure alternate supply lines while avoiding global market repercussions

India wants Russia to discount its oil to under $70 per barrel (BBG)
> State-owned and private refiners have bought more than 40 million barrels of Russian crude since the invasion of Ukraine in late February
> Meanwhile, independent refiners in China have begun purchasing Russian oil at substantial discounts (FT)

Natural Gas

The prompt-month (Jun' 22) gas contract is up by 46.8c this morning, near $8.422, after touching a fresh 13-year high of $7.954
> Lower-48 dry gas production is still near 92 Bcf/d. Over the last couple of weeks, production has struggled in the South Central and Rockies regions < If LNG exports stay near capacity all year, U.S. dry gas production will need to rise quickly to 97 Bcf per day for there to be any chance of refilling storage to the 5-year average before the beginning of the next winter heating season. This is why the Mother of All Bidding Wars has begun in early May.
> LNG feedgas demand is at around 12.14 Bcf/d. Freeport LNG feedgas volumes are back up near pre-maintenance levels
> Calcasieu Pass feedgas volumes are holding near their record-high of 1 Bcf/d. Cameron LNG nominations are lower, likely due to maintenance

Gas-fired power generation has been very strong, holding at around 65% of the thermal load, which includes coal, oil, and natural gas. This suggests that power producers are not utilizing coal because either coal prices have risen so much that gas is still more economical, or there are not enough coal supplies

U.S. LNG exports fell slightly in April, according to preliminary Refinitiv vessel tracking data
> U.S. LNG exports were about 7.10 MM tonnes (11.52 Bcf/d) last month, according to Refinitiv, down from a record high 7.67 MM tonnes (12.45 Bcf/d) in March
> Europe was the top importer of U.S. LNG for the fifth consecutive month, absorbing about 64% of all U.S. imports
> The drop in U.S. exports can be attributed to maintenance. Freeport brought a train down on April 5, and maintenance lasted through most of the month
> More maintenance will be conducted over the next few months, which should reduce exports

[geraldlong]

Dan, any comments on yesterday's API inventory report which showed large drops in oil, distillate, and gasoline inventories?

[dan_s]

Gerald: We are in a full blown "Energy Crisis". See my comments about the EIA's Weekly Petroleum report. If our refineries do not ramp up to 95% of capacity soon we will have diesel rationing this summer. We should be able to avoid gasoline rationing, but we are at risk of some regional shortages.

[dan_s]

Closing Prices:
> Prompt-Month WTI (Jun 22) was up $5.40 on the day, to settle at $107.81
> Prompt-Month Henry Hub (Jun 22) was up $0.461 on the day, to settle at $8.415 < If HH gas prices stay over $8.00 you should add 10% to 20% to all of my valuations for the "gassers". It is becoming clear that the U.S. cannot ramp up ngas production fast enough to meet demand and refill storage. This is a "Structural Problem" that may take years to solve, especially with our own government blocking infrastructure growth.

We MUST move to an "All of the Above" energy plan soon or we will be heading down the same path as Europe. The high standard of living we enjoy in America cannot be maintained without an abundant and reliable supply of energy. The diesel shortage is the most pressing problem.