Oil & Gas Prices - Jan 18
Posted: Wed Jan 18, 2023 10:01 am
Today's EPG Luncheon is back at the old Hess Club location, 5430 Westheimer Rd (~a mile west of the Galleria)
Opening Prices:
> WTI is up $1.43 to $81.61/bbl, and Brent is up $1.21 to $87.13/bbl.
> Natural gas is down -15.9c to $3.427/MMBtu.
AEGIS Notes
Oil
Oil continues to trade at its highest price since early December on hopes that Chinese demand will rebound
> Feb ’23 gains nearly $1.50 this morning to trade around $82/Bbl < Morgan Stanley's updated forecast is that Brent will go to $110/bbl by Q4 2023.
> IEA expressed optimism regarding Chinese demand recovery in its January oil report
> The USD Index (DXY – a proxy for U.S. Dollar strength against a basket of six international currencies) continued weakening and fell to its lowest since June 2022. A weaker dollar (DXY Index) can cause foreign buyers of dollar-denominated commodities to pay more for the same amount of goods < At today's luncheon we will discuss how this might impact copper and lithium prices.
IEA sees global oil demand to hit a record high in 2023 as China reopens (IEA, BBG)
> IEA, in its January monthly report, revised up its global oil demand growth forecasts by 0.2 MMBbl/d to 1.9 MMBbl/d for 2023, with global oil demand expected to reach 101.7 MMBbl/d
> “This year could see oil demand rise by 1.9 MMBbl/d to reach 101.7 MMBbl/d, the highest ever, tightening the balances as Russian supply slows under the full impact of sanctions. China will drive nearly half this global demand growth even as the shape and speed of its reopening remains uncertain,” said IEA in its monthly report.
> However, the group said that the global oil markets are set to see a surplus of roughly 1 MMBbl/d in 1Q2023 before tightening in 2Q2023 as China reopens
Keep in mind that IEA has a long history of under-estimating oil demand.
Russian oil exports fell by just 0.2 MMBbl/d in December despite the EU embargo and the G7 price cap
> The report added that the EU ban on Russian oil products from Feb 5 could soon mean that “the well-supplied oil balance at the start of 2023 could quickly tighten, however, as western sanctions impact Russian exports”
Natural Gas
Natural gas prices are lower by 4.5% to $3.42 in the prompt month
> The Summer ’23 seasonal strip is lower by 12c to $3.36, and the Winter ‘23/’24 strip is down 8c to $4.25
> Weather forecasts have warmed slightly compared to yesterday, but throughout the month of January, temperatures are expected to steadily decline to the 10-year normal and fall below normal by the end of the month
Gas begins to flow to Freeport LNG (Reuters)
> On January 14, gas flows into the Freeport LNG export, facility started to increase, reaching 69 mmcf/d
> A source said that the flows were to the plant’s pre-treatment facility for the purpose of maintaining the flare system
> A small amount of gas flowed into the facility in December, which was also to maintain the flare system
Qatar and UAE energy ministers anticipate a tight global gas market due to underinvestment (S&P)
> Qatar’s energy minister said that he expects gas prices to remain volatile throughout 2023 but raised concerns about demand destruction
> He also said that he believes Russian gas will return to Europe if a resolution to the Ukraine-Russia conflict is found
> Qatar does not have any new LNG facilities entering operation in 2023 or 2024 but will increase its gas export volumes by 64% through 2027
> While the finalization of the expansion is several years away, the energy minister said that it is likely that all volumes will be purchased through long-term contracts by the end of 2023
Opening Prices:
> WTI is up $1.43 to $81.61/bbl, and Brent is up $1.21 to $87.13/bbl.
> Natural gas is down -15.9c to $3.427/MMBtu.
AEGIS Notes
Oil
Oil continues to trade at its highest price since early December on hopes that Chinese demand will rebound
> Feb ’23 gains nearly $1.50 this morning to trade around $82/Bbl < Morgan Stanley's updated forecast is that Brent will go to $110/bbl by Q4 2023.
> IEA expressed optimism regarding Chinese demand recovery in its January oil report
> The USD Index (DXY – a proxy for U.S. Dollar strength against a basket of six international currencies) continued weakening and fell to its lowest since June 2022. A weaker dollar (DXY Index) can cause foreign buyers of dollar-denominated commodities to pay more for the same amount of goods < At today's luncheon we will discuss how this might impact copper and lithium prices.
IEA sees global oil demand to hit a record high in 2023 as China reopens (IEA, BBG)
> IEA, in its January monthly report, revised up its global oil demand growth forecasts by 0.2 MMBbl/d to 1.9 MMBbl/d for 2023, with global oil demand expected to reach 101.7 MMBbl/d
> “This year could see oil demand rise by 1.9 MMBbl/d to reach 101.7 MMBbl/d, the highest ever, tightening the balances as Russian supply slows under the full impact of sanctions. China will drive nearly half this global demand growth even as the shape and speed of its reopening remains uncertain,” said IEA in its monthly report.
> However, the group said that the global oil markets are set to see a surplus of roughly 1 MMBbl/d in 1Q2023 before tightening in 2Q2023 as China reopens
Keep in mind that IEA has a long history of under-estimating oil demand.
Russian oil exports fell by just 0.2 MMBbl/d in December despite the EU embargo and the G7 price cap
> The report added that the EU ban on Russian oil products from Feb 5 could soon mean that “the well-supplied oil balance at the start of 2023 could quickly tighten, however, as western sanctions impact Russian exports”
Natural Gas
Natural gas prices are lower by 4.5% to $3.42 in the prompt month
> The Summer ’23 seasonal strip is lower by 12c to $3.36, and the Winter ‘23/’24 strip is down 8c to $4.25
> Weather forecasts have warmed slightly compared to yesterday, but throughout the month of January, temperatures are expected to steadily decline to the 10-year normal and fall below normal by the end of the month
Gas begins to flow to Freeport LNG (Reuters)
> On January 14, gas flows into the Freeport LNG export, facility started to increase, reaching 69 mmcf/d
> A source said that the flows were to the plant’s pre-treatment facility for the purpose of maintaining the flare system
> A small amount of gas flowed into the facility in December, which was also to maintain the flare system
Qatar and UAE energy ministers anticipate a tight global gas market due to underinvestment (S&P)
> Qatar’s energy minister said that he expects gas prices to remain volatile throughout 2023 but raised concerns about demand destruction
> He also said that he believes Russian gas will return to Europe if a resolution to the Ukraine-Russia conflict is found
> Qatar does not have any new LNG facilities entering operation in 2023 or 2024 but will increase its gas export volumes by 64% through 2027
> While the finalization of the expansion is several years away, the energy minister said that it is likely that all volumes will be purchased through long-term contracts by the end of 2023