Oil & Gas Prices - Dec 20

[dan_s]

Opening Prices:
> WTI is up $0.63 to $75.82/bbl, and Brent is up $0.45 to $80.25/bbl.
> Natural gas is down -43.1c to $5.42/MMBtu.

AEGIS Notes
Oil

Oil extends gains amid renewed hope for Chinese demand, but the surge in COVID cases may limit gains < IMO the number of new cases of Covid is not important in a country with a population over 1.5 billion. What's important is the number of serious cases of people that need to be hospitalized and the number of deaths. If the new cases are mild, like 99% of those in the U.S., then isn't Covid just another flu? My point is that China cannot keep shutting down their economy each time a lot of people get the flu.
> WTI rose by nearly 60c this morning to trade above $75/Bbl
> The USD Index (DXY – a proxy for U.S. Dollar strength against a basket of six international currencies) marginally weakened relative to its recent highs
> A weaker dollar (DXY Index) can cause foreign buyers of dollar-denominated commodities to pay less for the same amount of goods

Despite China’s pledge to boost consumption, uncertainty over the impact of an uptick in COVID-19 cases in China, the world's largest oil importer, may affect near-term demand
> Beijing reported five more deaths on Tuesday as authorities rushed to add hospital beds and fever clinics to curb the potential spike in Covid cases
> Furthermore, US State Department expressed concerns yesterday regarding new Chinese Covid-19 mutations as they mark a threat to “people everywhere”

PHMSA said that TC Energy’s restart plan for the 0.622 MMBbl/d Keystone pipeline is still under review

Russia’s pipeline operator Transneft claims that Germany and Poland have ordered more Russian oil to be delivered in 2023 (BBG)
> However, Germany today reiterated its plan to end all purchases of Russian crude oil through 2023 after Transneft CEO Nikolay Tokarev claimed that Germany and Poland had applied for Urals in 1Q2023
> According to a German spokesperson, reports of orders for Russian crude are "false," and Schwedt and Leuna oil companies "will no longer order" Urals in 2023

Natural Gas

Natural gas prices are lower by nearly 9% to $5.42
> The Summer ’23 strip is down 35c to $4.67, and the Winter ‘23/’23 strip is lower by 26c to $5.25
> Weather forecasts have shifted warmer again today, with the Lower 48 forecast gaining 11.3 °F in the 6-15 day period
> The Midwest region had the largest change, with its forecast gaining 30 °F over the same period
> The Lower 48 forecast for the next two weeks has gained 17.7 °F in total over the past two days

EU agrees to natural gas price cap (Reuters) < This really has nothing to do with the U.S. or Canada natural gas markets.
> EU energy ministers announced on Monday that they have agreed to a price cap after several months of debate
> The price cap will take effect if prices exceed 180 euros/MWh for three consecutive days at the Dutch TTF trading hub
> The price cap could also be triggered if prices exceed 35 euros/MWh higher than an LNG reference price for three days
> The Intercontinental Exchange (ICE), which administers trading on the Dutch TTF hub, has said it will assess if it can continue to operate a fair and orderly market in the EU after raising concerns about liquidity following a price cap implementation

[dan_s]

Cold Snap Hinders Bakken Output. A cold snap sweeping across the US Midwest, sending temperatures into negative territory, has cut production in North Dakota's Bakken basin by 200-250,000 b/d or 20% of the play's total output. < I expect a lot more well freeze offs in the DJ Basin (Colorado), Oklahoma and West Texas as temperatures move way below freezing in a few days.

Canada’s pipeline operator TC Energy (TSE:TRP) submitted a restart plan for the 622,000 b/d Keystone pipeline to US regulator PHMSA, with initial rumors indicating a full restart might take several months.

[SergioSays]

Between the seasonal production declines from weather and the ending of the SPR draws, we could see some serious EIA crude draw #'s over the next 6 weeks

[dan_s]

Winter storm Uri reduced U.S. oil production by more than a million barrels a day in February 2021. This storm is not quite as bad and with luck it won't knock out electricity to most of Texas like Uri did.

[dan_s]

Closing Prices:
> Prompt-Month WTI (Jan 23) was up $0.90 on the day, to settle at $76.09
> Prompt-Month Henry Hub (Jan 23) was down $-0.525 on the day, to settle at $5.326 < This is a 7 week low. The selling looks overdone and I think it may be caused by paper traders needing to close their long positions before Christmas.