Oil & Gas Prices - Oct 6
Posted: Thu Oct 06, 2022 9:13 am
AEGIS Hedging Solutions has invited all EPG members to attend their live webinar today at 2PM CT. You will be getting the registration link from Sabrina via email this morning. Even if you cannot attend the live event, register so you will get the replay link.
Opening Prices:
> WTI is up $0.06 to $87.82/bbl, and Brent is up $0.06 to $93.43/bbl.
> Natural gas is up 19.6c to $7.126/MMBtu.
AEGIS Notes
Oil
Oil prices held near three-week highs after OPEC+'s production-cut announcement
> WTI is trading near $88/Bbl following a 10% gain over the past three days
> The cartel wants prices around $90/Bbl, says Nigerian Minister of State for Petroleum Resource Sylva
> Prices were also supported by Russian warnings of output cuts as the EU and the G7 nations backed a price cap on Russian crude
The OPEC+ alliance agreed to cut production by 2 MMBbl/d for November onward, the largest reduction since 2020
> In reality, supplies may be cut by a smaller amount as the shared pro-rata among members would only require eight countries to reduce actual output, resulting in a real reduction of around 0.9 to 1.1 MMBbl/d
> The cut comes ahead of an EU embargo on Russian oil and would squeeze supplies in an already tight market
> Saudi Energy Minister Prince Abdulaziz Bin Salman said that unless the market changes, the supply curbs will be in place through the end of 2023
> The cut comes despite aggressive lobbying by the Biden administration for the group to continue production at current or higher levels
> President Biden expressed his disappointment with the "shortsighted action" in a statement from the White House, adding that the move came "while the global economy is dealing with the continued negative impact of Putin's invasion of Ukraine." < It is my opinion that Biden is the one that is shortsighted. His draining of our Strategic Petroleum Reserves has placed the American economy and standard of living in danger.
> In a statement, White House national security adviser Jake Sullivan said that the U.S. would release another 10 MMBbl of crude from the SPR in November and that "the president will continue to direct SPR releases as appropriate to protect American consumers and promote energy security."
Alexander Novak, deputy prime minister of Russia, has warned that Russia may cut oil production in response to price caps imposed by western nations (BBG, Reuters)
> The remarks came as G7 nations approved a proposal to deny insurance, financing, brokering, and other services to oil cargoes priced above a level that has yet to be determined
> Yesterday, the EU also approved new sanctions, including support for a price cap on oil sales to third countries
> Novak said Russia "believes that this tool is in breach of all the market mechanisms. It could be very pernicious for the global oil industry…We will be ready to cut production (deliberately)."
> Additionally, several analysts have warned that if the EU and the U.S. move forward with a proposal to cap prices, Russia might cut its oil production by as much as 3 MMBbl/d
Goldman Sachs raised its 4Q Brent forecast by $10 to $110/Bbl following OPEC+'s announcement, according to a note from analysts, including Damien Courvalin (BBG)
> They added that OPEC+'s 2 MMBbl/d target cut amounts to an actual reduction of 1.2 MMBbl/d versus the bank's November forecasts "and an even larger 1.4 MMBbl/d vs. our forward balances if sustained through 2023."
> Morgan Stanley raised its Brent forecast by $5 to $100/Bbl for 1Q23 while keeping its outlook unchanged for the rest of the year
> Citigroup's Ed Morse and Francesco Martoccia said that while the cut is large on paper, the effective reduction will be much smaller, and the move could backfire on OPEC+ if it hits economic activity and oil demand further
Natural Gas
Natural gas prices continue to move higher for the third day this week, with the prompt month up 3% this morning
> The EIA will release its weekly storage report today, with a median estimated weekly change of 122 Bcf, according to the Bloomberg survey
> The five-year average storage build for this time of year is 83 Bcf, which would put today's expected injection on the more bearish side
> This would be the third consecutive build of more than 100 Bcf and the fourth in total this year
> AEGIS notes the large consecutive storage builds have helped narrow the deficit to the five-year average and should reduce fears of a supply problem this winter
Mountain Valley Pipeline may survive without congress or Manchin (BBG)
> Senator Joe Manchin failed to persuade other Democrats to support his permitting bill, but the pipeline's permits continue to be discussed in courts
> On October 25, the US Court of Appeals for the Fourth Circuit will hear arguments in a case relating to permits for MVP
> Several government agencies are currently reworking permits for the project
Sweden finds Nord Stream leaks caused by detonation (BBG)
> According to a preliminary investigation by the Swedish Security Service, the evidence leads them to believe the leaks were a deliberate act caused by explosives
> Denmark's police are conducting their own investigation as some of the leaks occurred in Danish territorial waters
> Norway has increased security around its energy assets in the region and said that they have seen "abnormally high" drone activity around their oil and gas facilities
Opening Prices:
> WTI is up $0.06 to $87.82/bbl, and Brent is up $0.06 to $93.43/bbl.
> Natural gas is up 19.6c to $7.126/MMBtu.
AEGIS Notes
Oil
Oil prices held near three-week highs after OPEC+'s production-cut announcement
> WTI is trading near $88/Bbl following a 10% gain over the past three days
> The cartel wants prices around $90/Bbl, says Nigerian Minister of State for Petroleum Resource Sylva
> Prices were also supported by Russian warnings of output cuts as the EU and the G7 nations backed a price cap on Russian crude
The OPEC+ alliance agreed to cut production by 2 MMBbl/d for November onward, the largest reduction since 2020
> In reality, supplies may be cut by a smaller amount as the shared pro-rata among members would only require eight countries to reduce actual output, resulting in a real reduction of around 0.9 to 1.1 MMBbl/d
> The cut comes ahead of an EU embargo on Russian oil and would squeeze supplies in an already tight market
> Saudi Energy Minister Prince Abdulaziz Bin Salman said that unless the market changes, the supply curbs will be in place through the end of 2023
> The cut comes despite aggressive lobbying by the Biden administration for the group to continue production at current or higher levels
> President Biden expressed his disappointment with the "shortsighted action" in a statement from the White House, adding that the move came "while the global economy is dealing with the continued negative impact of Putin's invasion of Ukraine." < It is my opinion that Biden is the one that is shortsighted. His draining of our Strategic Petroleum Reserves has placed the American economy and standard of living in danger.
> In a statement, White House national security adviser Jake Sullivan said that the U.S. would release another 10 MMBbl of crude from the SPR in November and that "the president will continue to direct SPR releases as appropriate to protect American consumers and promote energy security."
Alexander Novak, deputy prime minister of Russia, has warned that Russia may cut oil production in response to price caps imposed by western nations (BBG, Reuters)
> The remarks came as G7 nations approved a proposal to deny insurance, financing, brokering, and other services to oil cargoes priced above a level that has yet to be determined
> Yesterday, the EU also approved new sanctions, including support for a price cap on oil sales to third countries
> Novak said Russia "believes that this tool is in breach of all the market mechanisms. It could be very pernicious for the global oil industry…We will be ready to cut production (deliberately)."
> Additionally, several analysts have warned that if the EU and the U.S. move forward with a proposal to cap prices, Russia might cut its oil production by as much as 3 MMBbl/d
Goldman Sachs raised its 4Q Brent forecast by $10 to $110/Bbl following OPEC+'s announcement, according to a note from analysts, including Damien Courvalin (BBG)
> They added that OPEC+'s 2 MMBbl/d target cut amounts to an actual reduction of 1.2 MMBbl/d versus the bank's November forecasts "and an even larger 1.4 MMBbl/d vs. our forward balances if sustained through 2023."
> Morgan Stanley raised its Brent forecast by $5 to $100/Bbl for 1Q23 while keeping its outlook unchanged for the rest of the year
> Citigroup's Ed Morse and Francesco Martoccia said that while the cut is large on paper, the effective reduction will be much smaller, and the move could backfire on OPEC+ if it hits economic activity and oil demand further
Natural Gas
Natural gas prices continue to move higher for the third day this week, with the prompt month up 3% this morning
> The EIA will release its weekly storage report today, with a median estimated weekly change of 122 Bcf, according to the Bloomberg survey
> The five-year average storage build for this time of year is 83 Bcf, which would put today's expected injection on the more bearish side
> This would be the third consecutive build of more than 100 Bcf and the fourth in total this year
> AEGIS notes the large consecutive storage builds have helped narrow the deficit to the five-year average and should reduce fears of a supply problem this winter
Mountain Valley Pipeline may survive without congress or Manchin (BBG)
> Senator Joe Manchin failed to persuade other Democrats to support his permitting bill, but the pipeline's permits continue to be discussed in courts
> On October 25, the US Court of Appeals for the Fourth Circuit will hear arguments in a case relating to permits for MVP
> Several government agencies are currently reworking permits for the project
Sweden finds Nord Stream leaks caused by detonation (BBG)
> According to a preliminary investigation by the Swedish Security Service, the evidence leads them to believe the leaks were a deliberate act caused by explosives
> Denmark's police are conducting their own investigation as some of the leaks occurred in Danish territorial waters
> Norway has increased security around its energy assets in the region and said that they have seen "abnormally high" drone activity around their oil and gas facilities