Oil & Gas Prices - Jan 19
Posted: Thu Jan 19, 2023 10:05 am
First Look - Saudi Aramco sees a global demand rebound this year as China reopens
Opening Prices:
> WTI is down $0.16 to $79.32/bbl, and Brent is down $0.09 to $84.89/bbl. < WTI back over $80.00 at the time of this post.
> Natural gas is down -2.9c to $3.282/MMBtu.
AEGIS Notes
Oil
Oil extends losses amid reports of bearish economic data and storage build
> Feb ’23 loses nearly 20c this morning to trade around $79/Bbl
> Retail sales in the U.S. fell by the most in a year in December (down 1.1%), while manufacturing output declined by the most in nearly two years (down 1.3%) as higher borrowing rates reduced demand for goods
> However, Federal Reserve officials said interest rates must increase beyond 5% despite signals of subsiding inflation and slowing economic activity
The API reported a 7.6 MMBbl build in commercial stockpiles for the week ending Jan 13
> The USD Index (DXY – a proxy for U.S. Dollar strength against a basket of six international currencies) 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
Saudi Aramco sees a demand rebound this year as China reopens its economy (BBG)
“We are starting to see good signs coming out of China. Hopefully, in the next couple of months, we’ll see more of a pickup in the economy there,” said Aramco’s CEO Amin Nasser
> Nasser reiterated Saudi Arabia's long-held view that the market will suffer as a result of underinvestment in the industry in the past few years
> He added that the world would require 4-6 MMBbl/d of new supply only to compensate for the natural decline of maturing oilfields globally
> Currently, there is only 2 MMBbl/d of spare capacity, and when China reopens, that capacity is likely to shrink.
MY TAKE: All that is needed for WTI to move over $85/bbl is less FEAR of a recess and/or less FEAR of the Fed. In the "Real World" demand for oil-based fuels will exceed supply in Q2. Barring a MAJOR Recession, WTI should push over $100/bbl by early Q3. If you'd like to read Morgan Stanley's research on this topic send me an email. Longer term, I sure don't see where 4-6 million more bpd of new supply are going to come from and without Russian production, OPEC+ has very little additional supply they can add to the market.
Natural Gas
Natural gas prices are down slightly, trading around $3.30
> Weather forecasts have shifted warmer, with the Northeast region’s forecast gaining 11 °F in the 11-15 day period and the Midwest region's forecast gaining 13 °F over the same period < The ten day forecast shown on the Weather Channel website here shows much colder weather moving into the eastern U.S. > https://weather.com/maps/tendayforecast
Kinder Morgan proceeding with LNG terminal supply project (BBG)
> The company has received notice and credit support from Venture Global LNG to proceed with the $678 million Evangeline Pass project
> The project will supply natural gas to the proposed Plaquemines LNG facility which is being constructed by Venture Global
> The supply project will consist of two phases in which existing pipelines in Louisiana and Mississippi are modified and enhanced
Rystad sees Freeport LNG restart delayed until March (BBG)
> The firm said that a full restart of the export facility should not be expected until mid-year
> They described the regulatory approval status as “clouded” and said if the outage is extended again, gas could fall below $3/MMBtu
Pakistan to re-enter LNG market as prices fall (BBG)
> The country has not purchased any LNG cargoes since May 2022 due to high prices and increased competition among buyers
> The reduced imports have led to power shortages and blackouts across the country this year
> Asian spot LNG prices have fallen to their lowest level since August 2021 amid unseasonably warm weather across the northern hemisphere and reduced competition from European buyers
Opening Prices:
> WTI is down $0.16 to $79.32/bbl, and Brent is down $0.09 to $84.89/bbl. < WTI back over $80.00 at the time of this post.
> Natural gas is down -2.9c to $3.282/MMBtu.
AEGIS Notes
Oil
Oil extends losses amid reports of bearish economic data and storage build
> Feb ’23 loses nearly 20c this morning to trade around $79/Bbl
> Retail sales in the U.S. fell by the most in a year in December (down 1.1%), while manufacturing output declined by the most in nearly two years (down 1.3%) as higher borrowing rates reduced demand for goods
> However, Federal Reserve officials said interest rates must increase beyond 5% despite signals of subsiding inflation and slowing economic activity
The API reported a 7.6 MMBbl build in commercial stockpiles for the week ending Jan 13
> The USD Index (DXY – a proxy for U.S. Dollar strength against a basket of six international currencies) 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
Saudi Aramco sees a demand rebound this year as China reopens its economy (BBG)
“We are starting to see good signs coming out of China. Hopefully, in the next couple of months, we’ll see more of a pickup in the economy there,” said Aramco’s CEO Amin Nasser
> Nasser reiterated Saudi Arabia's long-held view that the market will suffer as a result of underinvestment in the industry in the past few years
> He added that the world would require 4-6 MMBbl/d of new supply only to compensate for the natural decline of maturing oilfields globally
> Currently, there is only 2 MMBbl/d of spare capacity, and when China reopens, that capacity is likely to shrink.
MY TAKE: All that is needed for WTI to move over $85/bbl is less FEAR of a recess and/or less FEAR of the Fed. In the "Real World" demand for oil-based fuels will exceed supply in Q2. Barring a MAJOR Recession, WTI should push over $100/bbl by early Q3. If you'd like to read Morgan Stanley's research on this topic send me an email. Longer term, I sure don't see where 4-6 million more bpd of new supply are going to come from and without Russian production, OPEC+ has very little additional supply they can add to the market.
Natural Gas
Natural gas prices are down slightly, trading around $3.30
> Weather forecasts have shifted warmer, with the Northeast region’s forecast gaining 11 °F in the 11-15 day period and the Midwest region's forecast gaining 13 °F over the same period < The ten day forecast shown on the Weather Channel website here shows much colder weather moving into the eastern U.S. > https://weather.com/maps/tendayforecast
Kinder Morgan proceeding with LNG terminal supply project (BBG)
> The company has received notice and credit support from Venture Global LNG to proceed with the $678 million Evangeline Pass project
> The project will supply natural gas to the proposed Plaquemines LNG facility which is being constructed by Venture Global
> The supply project will consist of two phases in which existing pipelines in Louisiana and Mississippi are modified and enhanced
Rystad sees Freeport LNG restart delayed until March (BBG)
> The firm said that a full restart of the export facility should not be expected until mid-year
> They described the regulatory approval status as “clouded” and said if the outage is extended again, gas could fall below $3/MMBtu
Pakistan to re-enter LNG market as prices fall (BBG)
> The country has not purchased any LNG cargoes since May 2022 due to high prices and increased competition among buyers
> The reduced imports have led to power shortages and blackouts across the country this year
> Asian spot LNG prices have fallen to their lowest level since August 2021 amid unseasonably warm weather across the northern hemisphere and reduced competition from European buyers