Oil & Gas Prices - Feb 28
Posted: Tue Feb 28, 2023 11:08 am
Opening Prices:
> WTI is up $1.98 to $77.66/bbl, and Brent is up $1.57 to $84.02/bbl.
> Natural gas is down -8.3c to $2.648/MMBtu.
AEGIS Notes with my comments in blue
Oil
West Texas Intermediate was 2.5% higher Tuesday morning as traders weighed multiple competing market factors
Despite both uncertainty and competing bullish and bearish variables, oil market volatility is falling
Brent crude is set to finish February with the smallest monthly range since June 2021 < Keep in mind that Q1 is the low point for oil demand each year. Demand for gasoline and diesel increases by more than 2 million bpd around mid-Q2. See the chart in the middle of page 2 in the newsletter. When OECD inventories start falling in Q2, the price of Brent will move toward and eventually over $100/bbl.
Bullish pressure is emerging as India, one of the Kremlin’s crude lifelines is experiencing increasing pressure from financiers wary of breaching Western sanctions (BBG)
Downstream and banking execs are now needing to prove Russian imports comply with a $60/Bbl price cap
Indian executives said refiners are scrambling, and the added scrutiny could slow down the pace of Russian imports
AEGIS notes that India has been a major outlet for Russian crude exports following sanctions imposed by G7 countries
The oil market’s most binding constraint is from refined oil products and waterborne transport rather than well-head production, according to Goldman Sachs (Bloomberg)
Oil products are displaying higher implied volatility than crude
The change in Russian crude flows has helped balloon oil on the water; now more than 100 MMBbl y-o-y
A lot of the U.S. refiners are now doing annual maintenance ("turnarounds"). This leads to falling inventories of refined products. They will need to ramp back up to more than 95% of design capacity to keep up with demand in June; increasing demand for crude oil.
Natural Gas
Natural gas is down about 3% to trade around $2.65
Weather forecasts have shifted warmer today
Forecasts for the Northeast, Midwest, and South Central regions all shifted warmer, while the West and Rockies shifted cooler
Gunvor could exit Tellurian deal (Reuters)
If Tellurian’s Driftwood LNG is unable to obtain project financing and full construction authorization by February 28, Gunvor could cancel their supply contract
Vitol and Shell canceled their own contracts with Tellurian last year, but Indian gas distributor GAIL said this month they are looking at buying a 26% stake in the project
Tellurian said on February 14 that the Driftwood project needs to raise a total of $11.7 billion through a mixture of debt, mezzanine financing, and equity offerings
IEA says Chinese gas demand a bigger risk for EU than Russian halt (BBG)
A resurgence in Chinese gas demand could have a larger effect on EU gas storage levels than a complete stoppage of flows from Russia
A bullish scenario for Chinese demand could lead to China’s LNG imports rising by as much as 35% in 2023 < WOW!
The EU has warned that European nations will still need to be disciplined with gas consumption despite inventories being well supplied
< I expect "Round Two of the Mother of All Bidding Wars" for LNG shipments to start this summer.
> WTI is up $1.98 to $77.66/bbl, and Brent is up $1.57 to $84.02/bbl.
> Natural gas is down -8.3c to $2.648/MMBtu.
AEGIS Notes with my comments in blue
Oil
West Texas Intermediate was 2.5% higher Tuesday morning as traders weighed multiple competing market factors
Despite both uncertainty and competing bullish and bearish variables, oil market volatility is falling
Brent crude is set to finish February with the smallest monthly range since June 2021 < Keep in mind that Q1 is the low point for oil demand each year. Demand for gasoline and diesel increases by more than 2 million bpd around mid-Q2. See the chart in the middle of page 2 in the newsletter. When OECD inventories start falling in Q2, the price of Brent will move toward and eventually over $100/bbl.
Bullish pressure is emerging as India, one of the Kremlin’s crude lifelines is experiencing increasing pressure from financiers wary of breaching Western sanctions (BBG)
Downstream and banking execs are now needing to prove Russian imports comply with a $60/Bbl price cap
Indian executives said refiners are scrambling, and the added scrutiny could slow down the pace of Russian imports
AEGIS notes that India has been a major outlet for Russian crude exports following sanctions imposed by G7 countries
The oil market’s most binding constraint is from refined oil products and waterborne transport rather than well-head production, according to Goldman Sachs (Bloomberg)
Oil products are displaying higher implied volatility than crude
The change in Russian crude flows has helped balloon oil on the water; now more than 100 MMBbl y-o-y
A lot of the U.S. refiners are now doing annual maintenance ("turnarounds"). This leads to falling inventories of refined products. They will need to ramp back up to more than 95% of design capacity to keep up with demand in June; increasing demand for crude oil.
Natural Gas
Natural gas is down about 3% to trade around $2.65
Weather forecasts have shifted warmer today
Forecasts for the Northeast, Midwest, and South Central regions all shifted warmer, while the West and Rockies shifted cooler
Gunvor could exit Tellurian deal (Reuters)
If Tellurian’s Driftwood LNG is unable to obtain project financing and full construction authorization by February 28, Gunvor could cancel their supply contract
Vitol and Shell canceled their own contracts with Tellurian last year, but Indian gas distributor GAIL said this month they are looking at buying a 26% stake in the project
Tellurian said on February 14 that the Driftwood project needs to raise a total of $11.7 billion through a mixture of debt, mezzanine financing, and equity offerings
IEA says Chinese gas demand a bigger risk for EU than Russian halt (BBG)
A resurgence in Chinese gas demand could have a larger effect on EU gas storage levels than a complete stoppage of flows from Russia
A bullish scenario for Chinese demand could lead to China’s LNG imports rising by as much as 35% in 2023 < WOW!
The EU has warned that European nations will still need to be disciplined with gas consumption despite inventories being well supplied
< I expect "Round Two of the Mother of All Bidding Wars" for LNG shipments to start this summer.