Oil & Gas Prices - Dec 8

[dan_s]

Opening Prices:
> WTI is up $2.71 to $74.72/bbl, and Brent is up $1.74 to $78.91/bbl.
> Natural gas is up 14.0c to $5.863/MMBtu.

AEGIS Notes
Oil

Oil recovers from its 2022 lows amid optimism about China's demand and Keystone outage
> WTI reversed some losses seen over the past four days but is still trading near YTD lows around $74/Bbl
> China announced significant revisions to its strict zero-Covid policy on Wednesday since the pandemic began
> The changes include dropping testing for domestic travelers and allowing infected individuals with mild symptoms to quarantine at home, indicating Beijing is shifting away from its zero-COVID policy < Lets hope so.

TC Energy today announced the closure of the Keystone pipeline to examine an oil leak that occurred 20 miles outside of Steele City, Nebraska (Reuters)
> The 0.622 MMBbl/d pipeline underwent an emergency shutdown yesterday after detecting reduced pressure in the system
> TC Energy reported that crews are working to contain and recover the oil

Russian Energy Minister Pavel Sorokin dismissed the EU-G7 price cap's effects on Russian oil production (BBG)
> “Most markets are available for our oil based on adequate market principles, while any fluctuations in oil production that may occur are not critical and will not exceed those registered in the spring,” said Sorokin today
> Sorokin's remarks coincide with plans for Moscow to stop selling crude to countries that accept the G7 price cap
> AEGIS notes that the sanctions could risk an estimated 0.5 to 1.5 MMBbl/d of Russian oil production

The Biden administration is weighing the impacts of China's reopening and the price cap’s effects on Russian output before replenishing the SPR (BBG)
> Amos Hochstein, a senior US energy security advisor, also said that "increased production" be expected in 1Q23 and 2Q23 and noted that the administration "needs more replenishing in the SPR" in the long run
> Hochstein's remarks come as crude trades at YTD lows and close to the administration's repurchasing price range of $67/Bbl to $72/Bbl

The price cap on Russian crude triggers an oil tanker lineup off Turkey (BBG)
> Twenty-six tankers from Kazakhstan carrying more than 23 MMBbl of oil were unable to pass Turkish waterways < This could turn into a significant loss of supply. Anyone's guess how much impact the G7 price caps will have. The $60/bbl doesn't seem to be much of an issue, but the lack of access to insurance might be.
> Turkey announced late last month that passing tankers would need to provide proof of insurance before being allowed to cross the straits in response to EU’s sanctions against Russia
> Traders and shipowners warned that the blockage could spike oil prices and shipping costs if the blockage isn't resolved in the next few days

Natural Gas

Natural gas prices are up slightly this morning to $5.87
> Weather forecasts shifted cooler for the second consecutive day, with the Lower-48 forecast falling 7 °F in the 1-15 day period
> The Northeast regions forecast fell 20 °F over the same period

Current weather forecasts indicate that this December may be one of the coldest of the previous five-years
> The late December cooling is expected to push natural gas demand for space heating to 105 Bcf/d from its current level of about 80 Bcf/d

White House launches effort to remove fossil fuels from federal buildings (Reuters)
> The goal of The Federal Building Performance Standard is to reduce onsite fossil fuel consumption by 90% by 2025 and achieve zero emissions in 30% of government buildings by 2030
> Most onsite fossil fuel consumption is from natural gas for heating
> Gas powered heating would be replaced with electricity-based heating sources such as heat pumps < Electricity coming from coal-fired power plants.

The US Energy Secretary described the rule as part of a growing movement to cut natural gas usage in all US commercial and residential buildings, which account for more than 30% of US emissions
> The President of The American Gas Association said that “Eliminating natural gas in federal buildings is an impractical, unscientific, and expensive idea that will have no environmental benefit” < The Administration does not care if it actually does anything to reduce carbon emissions, they just want to keep the Climate Change Wacko Cult members happy.

Winter electricity prices in the US Northeast could be the most expensive in the country (Reuters)
> The EIA estimates that wholesale electricity prices in New England could be three times higher than prices in other regions
> Prices could peak as high as $215/MWh, especially if access to imported LNG and heating oil is constrained
> New England does not have enough natural gas pipeline capacity to meet its heating demands in the winter and must supplement it with heating oil and LNG imports < There are trillions of cubic feet of clean burning natural gas that is under the NE quarter of Pennsylvania that could be shipped via pipeline to all New England states, but New York blocks all pipelines.
> High global LNG demand and an undersupplied diesel market could make it more difficult for the region to attract imports without higher prices < So New England is forced to import space heating fuels with some of it from Russia. Imported LNG will cost 5X to 10X more than the natural gas they could easily get from PA.