Oil & Gas Prices - Feb 13

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Oil & Gas Prices - Feb 13

Post by dan_s »

Don't forget to get your "Significant Other" a Valentines Day card and present.

Opening Prices:
> WTI is down $0.71 to $79.01/bbl, and Brent is down $0.72 to $85.67/bbl.
> Natural gas is down -8.0c to $2.434/MMBtu.

AEGIS Notes
Oil

Oil trades lower as the market weighs the impending Russian supply cut against demand recovery
March ’23 WTI lost nearly 70c to trade at around $79/Bbl this morning
The market awaits the January CPI report, which will be released on Tuesday

Flows from Turkey’s Ceyhan port resumed on Monday, the first since the devastating earthquakes in the region on February 6
Production also resumed at Norway’s largest oil field last week after an outage halted 0.5 MMBbl/d of loadings
Russia said on Friday that it would cut output by 0.5 MMBbl/d in March

Concerning global crude supply, UAE Energy Minister Al Mazrouei said there is no need for an early OPEC+ meeting as he believes the crude market is “balanced” (BBG)

A slightly stronger US Dollar weighed on prices this morning
A stronger dollar (DXY Index) can cause foreign buyers of dollar-denominated commodities to pay more for the same amount of goods

OPEC+ does not need to hold extraordinary meetings as the oil market is balanced, according to UAE Energy Minister Sahail Al Mazrouei (Bloomberg)
In October 2022, OPEC+ members decided to maintain their production targets through 2023 after lowering oil output by 2 MMBbl/d
Mazrouei further said that the group intends to continue with this agreement unless " we have something that would shake the market….and we haven’t seen that”
The bloc also indicated to maintain output despite Russia’s plans to cut production by 0.5 MMBbl/d in March

Natural Gas

Natural gas prices are down 3%, around $2.43, in the prompt month
The Summer ’23 seasonal strip is lower by 13c to $2.92, and the Winter ‘23/’24 strip is down 9c to $3.86
Weather forecasts are mixed, with the largest change occurring for the Rockies region where the 6-10 day period warmed by 28.6 °F

Natural gas prices trading below the cost of coal (Reuters)
Natural gas prices have fallen to their lowest level in years, which could lead to increased consumption from the power sector
Falling gas prices should incentivize power producers to run gas-powered generators longer and use less coal
A boost in power-sector demand could reduce the amount of gas injected into storage, balancing the market, according to Reuters

First vessel docks at Freeport LNG since fire (Reuters)
On Friday, an LNG tanker docked at Freeports loading dock and took cargoes of LNG that had been stored in the facility's onsite storage tanks
Freeport has continued to take small volumes of gas, with flows on Monday totaling 0.5 Bcf/d
The increase in gas flows to Freeport have brought total LNG feedgas to its highest level since May, at 13.3 Bcf/d
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - Feb 13

Post by dan_s »

RBC Capital Oil Market Report
February 12, 2023
Oil Market in 60 Seconds: Themes, Sentiment & Notes from the Road
Views and Sentiment Following Marketing This Week

 Views & Sentiment: We remain constructive and see asymmetric upside risk to the oil complex this
year, but volatility has been the name of the game so far in 2023. Given the macro dominance, most
oil traders see near term rangebound markets with upside price skew, but strong directional views
are weakly held. The headlines of Russia cutting 500 kb/d of output for March should fortify upside
conviction. A recent ransomware attack has led to two consecutive weeks without the CFTC
releasing positioning data, but the latest data does not point to many shorts, instead, the recent
directionless price action appears to be a function of lethargic length. Last week’s rally suggests that
length will be higher, but far from high by the time the next report is released. If the market is not
positioning for upside when Russian and China are both directionally bullish, when will it be?

 Global Marginal Barrels: North Sea and West African (WAF) Atlantic Basin crudes are the marginal
barrels in the market, and while indication of a pick up in WAF loadings for February emerged last
week, major North Sea streams like Forties (largest physical stream underpinning the Brent
benchmark) remain soft (Figure 1). Overall, these barrels are mixed. This means that either, China’s
post COVID ramp has not been meaningful enough to tighten the physical market (yet), or demand
elsewhere remains uninspiring. Either way, there remains slack in the physical crude system, for
now. Front Brent spreads rallied last week and clawed back into firm backwardation, following a
soft contract expiry to close out January (Figure 2). The barrage of recent temporary supply side
outages (Turkey, Kazakhstan, etc) help to tighten physical balances, but we need to see true physical
tightening, particularly in the North Sea diffs before the paper market can rally. We have all learned
over the years that markets rather reward demand strength over supply tightness.

 Russian Physical Flow: The re-mapping of both Russian and global energy flows remains a work in
progress. Russian crude output falling 500 kb/d in March is undoubtedly constructive for the oil
complex, particularly for medium and heavy crudes (See Brent-Dubai below). Our latest flow data
suggest that seaborne crude exports have strongly rebounded in January from December levels
(+830 kb/d, m/m), given the rerouting of flows typically earmarked on Druzhba to the Baltic ports
of Primorsk and Ust-Luga. Product exports have surged to post invasion highs over the past three
months, with diesel alone averaging 1 mb/d between November and January as Russia made the
big push to offload barrels before the Feb 5th EU product ban. Some 75% of Russian diesel exports
typically went to the EU prior to the invasion, but that figure fell to sub 50% in January. Russia has
been able to find unconventional homes for its refined products, so far. For example, Africa is taking
nearly three times as much Russian refined product than year ago levels (Figure 3). That said, the
remaining cargoes typically earmarked for Europe (we estimate 400-500 kb/d in diesel alone) are,
at least in the near term, at risk of struggling to find new homes following the Feb 5th product ban.

 China & Global Light/Heavy Differentials: The Brent premium to the Dubai benchmark has
narrowed sharply to $2.00/bbl since peaking in early December north of $5.50/bbl (Figure 5). We
have flagged this as a key indicator to watch to assess the rate of change of Chinese buying given
that Beijing typically buys medium and heavy sour barrels. The tightening in the medium and heavy
barrel complex will accelerate as Russia sits their barrels down. Major heavy benchmarks such as
WCS are among such heavy grades catching an aggressive bid as a result.

 Singapore Gasoil Crack & US/Euro Crack on Crack: Our refinery crack on crack thesis drove our
2022 oil market outlook, and while product inventories remain tight across many regions, much
focus has shifted toward whether products can continue to lead the oil complex. The softening
Singapore gasoil crack, a proxy for global absorption rates given rising Chinese product exports, is
a concerning indicator for further potential downside for European gasoil and North American
Heating Oil cracks over the near term. Further, the build out of several global refineries, ranging
from Mexico’s Dos Bocas (340 kb/d) to Nigeria’s Dangote (650 kb/d), both slated to start up mid
2023, followed by a number of Middle Eastern units (along with China’s continued refined product
export ramp) are all expected to loosen the product markets come 2H’23.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - Feb 13

Post by dan_s »

Closing Prices:
> Prompt-Month WTI (Mar 23) was up $0.42 on the day, to settle at $80.14
> Prompt-Month Henry Hub (Mar 23) was down $-0.109 on the day, to settle at $2.405
Dan Steffens
Energy Prospectus Group
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