Oil & Gas Prices - May 25
Posted: Wed May 25, 2022 8:53 am
Opening Prices:
> WTI is up $1.49 to $111.26/bbl, and Brent is up $1.27 to $114.83/bbl.
> Natural gas is up 37.8c to $9.174/MMBtu.
AEGIS Notes
Oil
The U.S. DOE has offered to sell up to 40.1 MMBbls of crude oil from the SPR as part of the scheduled release announced in March
> The agency will release up to 39 MMBbls of sour crude for supply from July 1-August 15
> DOE also said the remaining 1.1 MMBbls would be sweet crude for delivery between June 21 and 30. Bids are due on June 1st, and awards will be made by June 10th
Saudi Arabia's foreign minister Prince Faisal bin Farhan said that the country could do nothing more to help oil markets, speaking on a panel at the World Economic Forum in Davos, Switzerland < OPEC+ is basically out of spare capacity. Any increases by Saudi Arabia and UAE are offset by other cartel members' declines.
> He added that the oil market "is relatively in balance," despite requests for the country to increase crude production
> According to OPEC data, Saudi Arabia pumped 10.35 MMBbl/d of oil in April, with the country increasing output by around 100 MBbl/d each month to meet its quota under the OPEC+ agreement. But that's still a lot less than its declared capacity of 12.5 MMBbl/d
The American Petroleum Institute estimated a crude inventory build of 0.6 MMBbls for the week ending May 20, with a 0.7 million MMBbls draw at Cushing
> The API reported gasoline and distillate draws of 4.2 MMBbls and 0.9 MMBbls, respectively
> Gasoline stockpiles are at the lowest level for this time of the year since 2013 < I am hoping we can avoid gasoline rationing, but inventories are going to be drawn way down over the Memorial Day holiday.
> EIA inventory data is scheduled to be released later today
Natural Gas
Natural gas futures are up above $9 for the first time since 2008. Further dated tenors, are rallying too, trying to keep pace with the near-term contracts and keep time spreads within reason. The week-over-week changes are as follows:
> Summer 22: +10.81%, at $9.167 < My forecast/valuation models are using $6.00 for Q3
> Winter 22/23: +9.53%, at $8.818 < My forecast/valuation models are using $6.50 for Q4
> Summer 23: +5.36%, at $5.129
> Winter 23/24: +4.42% at $5.410
This morning's rally comes despite the net bearish impact on forecasted demand from changes in the weather forecasts. Weather forecasts were unchanged, with the total lower-48 pop-weighted temperature average (1-15 day range) falling -2.2°F. The 6-10 day range saw the most change, with Midwest warming by 11.2°F, which wiped out a lot of forecasted demand
Lower-48 dry gas production is steady at around 95.3 Bcf/d, which is only 0.3 Bcf/d higher than last week < In order to refill storage AND keep LNG exports at 13 Bcf per day, U.S. gas production must rise SOON to over 97 Bcf per day. There is little chance that will happen, so natural gas prices will continue to rise as we move closer to the beginning of the winter heating season.
LNG feedgas demand is back above 13.4 Bcf/d, which is the highest in weeks, and only 500 MMcf/d removed from its all-time record on March 19
> Criterion Research has pointed out that Sabine Pass LNG feedgas demand flows have been weaker as the region faces a heatwave
> AEGIS notes that the daily supply-demand balance has remained pretty steady, despite the increases in price
Greece's DEPA complies with Russian demands to pay in Roubles
> DEPA Commercial, Greece's largest gas importer, has paid Russian gas producer Gazprom in Roubles for April natural gas volumes, according to Reuters
Poland, Bulgaria, and Finland have refused to comply with Moscow's demand that importers pay for gas via Rouble accounts with Gazprombank, leading their supplies to be cut
> AEGIS notes that the natural gas market is unique in that traders have limited ability to move cargoes globally, and when pipeline flows are cut, usually that means that gas needs to be shut in with nowhere else to go unless there is liquefaction capacity nearby to export. The impact of these countries' gas volumes being cut will be felt by global markets
> WTI is up $1.49 to $111.26/bbl, and Brent is up $1.27 to $114.83/bbl.
> Natural gas is up 37.8c to $9.174/MMBtu.
AEGIS Notes
Oil
The U.S. DOE has offered to sell up to 40.1 MMBbls of crude oil from the SPR as part of the scheduled release announced in March
> The agency will release up to 39 MMBbls of sour crude for supply from July 1-August 15
> DOE also said the remaining 1.1 MMBbls would be sweet crude for delivery between June 21 and 30. Bids are due on June 1st, and awards will be made by June 10th
Saudi Arabia's foreign minister Prince Faisal bin Farhan said that the country could do nothing more to help oil markets, speaking on a panel at the World Economic Forum in Davos, Switzerland < OPEC+ is basically out of spare capacity. Any increases by Saudi Arabia and UAE are offset by other cartel members' declines.
> He added that the oil market "is relatively in balance," despite requests for the country to increase crude production
> According to OPEC data, Saudi Arabia pumped 10.35 MMBbl/d of oil in April, with the country increasing output by around 100 MBbl/d each month to meet its quota under the OPEC+ agreement. But that's still a lot less than its declared capacity of 12.5 MMBbl/d
The American Petroleum Institute estimated a crude inventory build of 0.6 MMBbls for the week ending May 20, with a 0.7 million MMBbls draw at Cushing
> The API reported gasoline and distillate draws of 4.2 MMBbls and 0.9 MMBbls, respectively
> Gasoline stockpiles are at the lowest level for this time of the year since 2013 < I am hoping we can avoid gasoline rationing, but inventories are going to be drawn way down over the Memorial Day holiday.
> EIA inventory data is scheduled to be released later today
Natural Gas
Natural gas futures are up above $9 for the first time since 2008. Further dated tenors, are rallying too, trying to keep pace with the near-term contracts and keep time spreads within reason. The week-over-week changes are as follows:
> Summer 22: +10.81%, at $9.167 < My forecast/valuation models are using $6.00 for Q3
> Winter 22/23: +9.53%, at $8.818 < My forecast/valuation models are using $6.50 for Q4
> Summer 23: +5.36%, at $5.129
> Winter 23/24: +4.42% at $5.410
This morning's rally comes despite the net bearish impact on forecasted demand from changes in the weather forecasts. Weather forecasts were unchanged, with the total lower-48 pop-weighted temperature average (1-15 day range) falling -2.2°F. The 6-10 day range saw the most change, with Midwest warming by 11.2°F, which wiped out a lot of forecasted demand
Lower-48 dry gas production is steady at around 95.3 Bcf/d, which is only 0.3 Bcf/d higher than last week < In order to refill storage AND keep LNG exports at 13 Bcf per day, U.S. gas production must rise SOON to over 97 Bcf per day. There is little chance that will happen, so natural gas prices will continue to rise as we move closer to the beginning of the winter heating season.
LNG feedgas demand is back above 13.4 Bcf/d, which is the highest in weeks, and only 500 MMcf/d removed from its all-time record on March 19
> Criterion Research has pointed out that Sabine Pass LNG feedgas demand flows have been weaker as the region faces a heatwave
> AEGIS notes that the daily supply-demand balance has remained pretty steady, despite the increases in price
Greece's DEPA complies with Russian demands to pay in Roubles
> DEPA Commercial, Greece's largest gas importer, has paid Russian gas producer Gazprom in Roubles for April natural gas volumes, according to Reuters
Poland, Bulgaria, and Finland have refused to comply with Moscow's demand that importers pay for gas via Rouble accounts with Gazprombank, leading their supplies to be cut
> AEGIS notes that the natural gas market is unique in that traders have limited ability to move cargoes globally, and when pipeline flows are cut, usually that means that gas needs to be shut in with nowhere else to go unless there is liquefaction capacity nearby to export. The impact of these countries' gas volumes being cut will be felt by global markets