Oil & Gas Prices - Nov 16

[dan_s]

Opening prices
> WTI is down $1.93 to $84.99/bbl, and Brent is down $1.58 to $92.28/bbl.
> Natural gas is down -20.8c to $5.826/MMBtu.

Oil trades lower amid concerns of weaker demand
WTI fell by nearly $1/Bbl this morning to trade below $85/Bbl
China’s strict zero-Covid policy continues to weigh on oil demand

The dollar continues to weaken relative to its recent 20-year highs
The USD Index (DXY – a proxy for U.S. Dollar strength against a basket of six international currencies) fell more than 3% last week to the lowest since August
A weaker dollar (DXY Index) can cause foreign buyers of dollar-denominated commodities to pay less for the same amount of goods

The IEA cautions that the diesel demand may decline in 2023 (BBG)
The IEA, in its November monthly report, said that economic challenges would cause demand growth to decrease in 2023 to 1.6 MMBbl/d from 2.1 MMBbl/d this year and down 0.1 MMBbl/d from their prior forecast

Fuel consumption is already beginning to feel the strain of rising prices, and this quarter's global demand is expected to decline by 0.240 MMBbl/d from last year's levels, the agency estimated
The group also said that the high diesel prices would lead to a decline in demand growth for diesel from 1.5 MMBbl/d in 2021 to 0.4 MMBbl/d in 2022

The organization continued to add that “The increasingly ominous global outlook, along with very high prices, is set to significantly curtail diesel demand in 2023”

The IEA also warned that the EU’s upcoming sanctions on Russia might significantly reduce oil supplies
The agency forecasts that Russian output will continue to decline by 15% in early 2023
According to the IEA, Russia may struggle to find new markets for its oil after the EU ban goes into effect, potentially pushing the country's average output to fall below 10 MMBbl/d next year
Russia has diverted more than a million barrels per day to India, China, and Turkey since many of its traditional customers fell away following the invasion of Ukraine
However, recent stability in those flows has led to speculation that those nations may not be able to ramp up imports further

Natural Gas

Natural gas prices are up slightly this morning; in the prompt month
Weather forecasts have shifted warmer, with the Lower 48 forecast gaining 16.5 degrees over the 1-15 day period
Most of the changes occurred in the Midwest and South-Central regions, although every region forecast shifted warmer

Appalachian gas production may move higher soon (BBG)
Production from the Appalachian region has yet to follow its seasonal trend of increased production in the fourth quarter
Increased demand from cooler weather alleviates some pipeline constraints and allows more gas from production to enter the pipeline system
Eastern Gas South Point basis has recently rallied to -$0.87, from as low as -$2.33 in September

European gas prices rise amid concerns of extended Freeport delay (BBG)
As many market participants push back estimates of Freeports reopening and rumors relating to the restart circulate, Dutch TTF gas prices have rallied 16%
Freeport recently informed buyers that shipments scheduled for November or December might have to be canceled as repairs continue
European gas prices have been declining for the past month as unseasonably warm temperatures and full storage has reduced fears of a supply shortage, but continued LNG flows into the continent will still be necessary