Oil & Gas Prices - Jan 11

[dan_s]

I am lowering my natural gas price to $4.00 for 2023. WTI in now likely to exceed $85 within a few months.

Opening prices:
> WTI is up $1.00 to $76.12/bbl, and Brent is up $1.07 to $81.17/bbl.
> Natural gas is up 9.5c to $3.734/MMBtu.

AEGIS NOTES
OIL

Oil extends gains after trading lower earlier today
Feb ’23 WTI gains nearly $1 this morning to trade above $76/Bbl
Crude fell by about $1/Bbl during the overnight session after API estimated a 14.9 MMBbl crude build for last week
It would be the largest build since February 2021 if confirmed by the EIA today

The market focus remains on the outlook for recovery in Chinese demand and U.S. monetary policy
Additionally, the U.S. Dollar fell to its lowest level in seven months, supporting crude prices
A weaker dollar (DXY Index) can cause foreign buyers of dollar-denominated commodities to pay more for the same amount of goods
Thursday’s CPI data will be closely watched for further indications of the pace of future rate hikes

Nigeria's crude production increases to 1.5 MMBbl/d after a reduction in oil theft
Due to a reduction in theft, Nigeria's crude production increased to 1.5 MMBbl/d from less than 1 MMBbl/d in September 2022, according to the Nigeria Upstream Petroleum Regulatory Commission (NUPRC)
Additionally, they noted that they were still fighting oil theft, which is expected to result in more production levels in the long term
Africa's largest producer has struggled to stabilize its production due to Internal strife, especially in the Delta region, compounded by rampant theft from its pipelines and years of underinvestment

IEA says the EU's ban on Russian oil products will alter trade flows and reconfigure markets (S&P Global)
The EU's ban on Russian oil product exports on Feb 5 would be more complex than the impact of the sanctions on seaborne Russian crude that came into force on Dec 5, said Tim Gould, IEA's Chief Energy Economist at the 13th Global UAE Energy Forum
"We are going to need to have a very complex reconfiguration of flows also in the Atlantic Basin with Europe taking more from Middle Eastern suppliers and from North America, and then potentially Russian oil product exports finding a home in parts of Latin America or in Africa," added Gould
The IEA is forecasting that Russian output will fall by 1.4 MMBbl/d in 2023 due to the impact of EU sanctions and the G7 price cap

NATURAL GAS

Natural gas prices are up slightly to $3.73 after falling 27c to a new 13-month low yesterday
Weather forecasts shifted cooler, with the Midwest and Rockies regions forecasts falling by about 9 °F each in the 1-15 day period

The EIA released its monthly Short-Term Energy Outlook yesterday
The agency has revised its 2023 natural gas price forecast lower by nearly 10% from $5.43/MMBtu to $4.90/MMBtu
They warned, however, that extreme weather events could cause temporary price spikes, especially in regions with gas pipeline constraints, such as New England

The EIA forecasts gas production averaging 100.34 Bcf/d in 2023 and 102.29 Bcf/d in 2024, compared with 2022’s average production of 98.02 Bcf/d
Most production growth is expected to come from the Permian and Haynesville regions and will continue to grow as new pipeline infrastructure is built

US average wholesale electricity price reached a new high in 2022 (EIA)
Average wholesale electricity prices increased throughout 2022, with prices at all hubs being higher in 2022 than in 2021, apart from ERCOT
Limited coal availability and high natural gas prices contributed to the price increases
Severe weather, such as a heatwave this summer, which led to record electricity demand, also contributed to the rise in electricity prices

Governor of New York calls for banning natural gas in new buildings (BBG)
During an address on Tuesday, Governor Kathy Hochul proposed to make New York the first state to ban gas heating and appliances
This comes amid new research linking gas stoves to asthma and indoor pollutants
Any ban on gas appliances would only apply to new construction and would not apply to existing buildings with gas appliances installed < So it will have very little impact on US natural gas demand

[dan_s]

Closing Prices
> Prompt-Month WTI (Feb 23) was up $2.29 on the day, to settle at $77.41
> Prompt-Month Henry Hub (Feb 23) was up $0.032 on the day, to settle at $3.671