Oil & Gas Prices - May 12

[dan_s]

Opening Prices:
> WTI is up $0.45 to $71.32/bbl, and Brent is up $0.40 to $75.38/bbl.
> Natural gas is down -2.3c to $2.167/MMBtu.

AEGIS Notes
Oil

WTI traded slightly higher on Friday morning as traders weighed economic concerns with optimism that the U.S. plans to refill the SPR after June
Oil has fallen by about 15% over the past four weeks amid uncertainty surrounding oil demand
Oil market participants have been giving demand concerns more weight than pending supply cuts from OPEC+

U.S. Energy Secretary Jennifer Granholm said Thursday that the Energy Department hopes to start buying oil to refill the SPR after a Congressionally mandated sale ends in June (Bloomberg) < Note that we are still draining the SPR. Just stopping that nonsense will tight the oil market.
Oil prices at $70/Bbl is the administration’s buying range < I doubt we see WTI move under $70 for any length of time this year or next, so Ms. Granholm actually refilling the SPR is highly unlikely.
“It’s at that point where we will flip the switch and hope to be able to purchase,” Granholm said during House testimony

The EU has put forth a proposal to halt piped Russian oil flows to Germany and Poland (BBG)
Germany and Poland have reportedly already stopped receiving oil via the Druzba pipeline, even though both nations are allowed to
The main focal point of the new proposal is to crackdown on the circumvention of restrictions
AEGIS notes that Russia has claimed to have reduced oil exports by pipe as many headlines continue to highlight robust waterborne exports
In total, Russia agreed to reduce its production by 500 MBbl/d in coordination with last month’s OPEC+ supply cut

Natural Gas

Natural gas prices are trading lower but set for a higher weekly close
Lower 48 average temperatures are expected to rise from 65 °F this week to 67 °F over the next two weeks
Gas production remains depressed at around 100.5 Bcf/d, down from last months peak of 102 Bcf/d

Proposed LNG facilities at risk due to permit crackdown (Reuters)
The Department of Energy is refusing to grant export permit extensions to LNG projects that don’t meet construction deadlines, saying that future extensions will only be granted on extenuating circumstances
This could create problems for projects that have limited financing available or ones that have had construction difficulties
Glenfarne Group, the developer of Texas LNG and Magnolia LNG, said they are confident that the DOE will provide permit extensions to their projects
This should have no impact on the next two large LNG exports facilties set to come online in mid-2024 (Plaquemines) and Q1 2025 (Golden Pass).

NERC sees the US at risk of tight electricity supplies this summer (Reuters)
The North American Electric Reliability Corp said on Wednesday that power resources are adequate for normal summer peak demand, but sustained widespread temperature spikes could leave some regions with a generation shortfall
The regions they mentioned are the US West, Midwest, Southeast, Texas, New England, and Ontario

[dan_s]

Closing Prices:
> Prompt-Month WTI (Jun 23) was down $-0.83 on the day, to settle at $70.04
> Prompt-Month Henry Hub (Jun 23) was up $0.076 on the day, to settle at $2.266

It has been a rough week for oil prices, but the fundamentals still look good for oil price to move a lot higher this summer. The "noise" (Fear of Recession, What will the Fed to next?, Will the idiots in Washington, DC raise the debt limit?, Chinese economy, Russian oil exports, etc,) is keeping a lot of investors on the sidelines. Just remember that demand for oil-based product always increases in the summer.