Opening Prices:
> WTI is up $0.45 to $70.49/bbl, and Brent is up $0.45 to $74.62/bbl.
> Natural gas is up 7.7c to $2.343/MMBtu.
AEGIS Notes
Oil
Oil traded over $70/Bbl Monday morning after four previous weeks of declines
> President Biden’s staff and House Speaker McCarthy’s office are in serious and continuing negotiations on the debt ceiling
> Speculators and money managers have amassed the largest bearish position in ICE Brent since July 2021. Hedge funds are less bearish on US crude futures and options
Refinery profit margins for typically low-value fuel oil in Asia are improving (BBG)
> The ‘bottom of the barrel’ was lifted as refineries in Asia and the Middle East turned to fuel oil
> The discount for Singapore 380-centistoke high-sulfur fuel oil over Dubai benchmark crude – a heavily watched industry metric - narrowed to $7.05/Bbl on Monday from near $24 at the start of the year, according to Bloomberg
> The price boost for typically less desirable inputs is boosting demand for heavier crude grades
Fires continue to rage in Canada’s producing region (Bloomberg)
> A heat wave brought hot, dry conditions, prompting officials to warn that more blazes are coming
> This month’s fires have largely spared the oil-sands region, unlike the 2016 blaze that knocked more than 1 MMBbl/d offline near Fort McMurray
> The current fires have helped lift an already strengthening WCS crude oil whose discount to WTI has narrowed to -$12.85/Bbl
Crescent Point Energy (CPG) and InPlay Oil (IPOOF) have reported that some wells have been shut in.
Natural Gas
Natural gas prices are higher, around $2.35, extending gains from Friday < My "hope" is that HH moves over $2.50 by the end of June and over $3.00 by the end of September.
> Weather forecasts shifted cooler, with the Lower 48 two-week forecast losing 6.4 °F
> Demand for space cooling is forecast to be below the 10-year average until May 24 before climbing to above-average levels into the end of the month
LNG feedgas continues to be down about 2 Bcf/d from the highs set last month due to scheduled maintenance at several facilities
Natural gas rig count falls by the most since 2016 (BBG)
> The Baker Hughes weekly rig count on Friday reported a decline of 16 natural gas directed drilling rigs, falling from 157 to 141 < As I have posted here many times, "market forces" will rebalance the U.S. natural gas market this summer. It is just Good Business not to complete shale gas wells that come online strong and decline rapidly into today's low gas prices when much higher gas prices are just a few months away.
> The drop was dispensed between regions, with five rigs dropped from the Haynesville, three from the Permian Basin, and three from the Marcellus
> The reduction is in-line with language from public producers who have discussed cutting back on drilling activity
Some LNG projects may startup earlier than expected (S&P)
> Research firm, Bernstein, cited three export projects they believe will come online earlier than expected in 2024 and 2025
> Venture Global’s Plaquemines LNG, Exxon Mobile’s Golden Pass, and Cheniere’s Stage Three expansion were listed as the projects which could be completed sooner than company estimates indicate < This is extremely good news for all of our "gassers". We will be publishing updated profiles on Antero Resources (AR) and Comstock Resources (CRK) today. We just published the updated profile on SM Energy (SM) this morning, which has a lot of natural gas production.
> Bernstein said that the early arrival of demand would push market balances in 2024 from “very oversupplied to only slightly oversupplied” < In Early 2025 the U.S. gas market will be under-supplied and could move to very under-supplied by 2027 when the U.S. will have close to 40 Bcf per day of export capacity.
Oil & Gas Prices - May 15
Oil & Gas Prices - May 15
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - May 15
This is bullish for oil demand and prices.
European Commission raises inflation forecasts on economic resilience
Spring 2023 Economist Forecast release out of the European Commission shows Brussels has lifted its inflation forecasts for this year and next, highlighting that robust jobs market and slightly stronger than expected growth in output underpin pricing pressures.
Brussels expects headline CPI on a y/y basis in the euro area in 2023 is set to average 6.1%, before falling to 3.2% in 2024, remaining above headline inflation in both forecast years. Furthermore, on the back of persisting core price pressures, inflation has also been revised upwards compared to the winter, to 5.8% in 2023 and 2.8% in 2024 in the euro area. In terms of growth, the statement said lower energy prices, abating supply constraints and a strong labour market supported moderate growth in Q1'23, dispelling fears of a recession. This better-than-expected start to the year lifts the growth outlook for the EU economy to 1.0% in 2023 (0.8% in the Winter interim Forecast) and 1.7% in 2024 (1.6% in the winter).
Upward revisions for the euro area are of a similar magnitude, with GDP growth now expected at 1.1% and 1.6% in 2023 and 2024 respectively, the statement showed. It highlighted downside risks to the economic outlook have increased, such as more persistent core inflation potentially restraining the purchasing power of households and renewed episodes of financial stress which could prompt a stronger monetary response.
European Commission raises inflation forecasts on economic resilience
Spring 2023 Economist Forecast release out of the European Commission shows Brussels has lifted its inflation forecasts for this year and next, highlighting that robust jobs market and slightly stronger than expected growth in output underpin pricing pressures.
Brussels expects headline CPI on a y/y basis in the euro area in 2023 is set to average 6.1%, before falling to 3.2% in 2024, remaining above headline inflation in both forecast years. Furthermore, on the back of persisting core price pressures, inflation has also been revised upwards compared to the winter, to 5.8% in 2023 and 2.8% in 2024 in the euro area. In terms of growth, the statement said lower energy prices, abating supply constraints and a strong labour market supported moderate growth in Q1'23, dispelling fears of a recession. This better-than-expected start to the year lifts the growth outlook for the EU economy to 1.0% in 2023 (0.8% in the Winter interim Forecast) and 1.7% in 2024 (1.6% in the winter).
Upward revisions for the euro area are of a similar magnitude, with GDP growth now expected at 1.1% and 1.6% in 2023 and 2024 respectively, the statement showed. It highlighted downside risks to the economic outlook have increased, such as more persistent core inflation potentially restraining the purchasing power of households and renewed episodes of financial stress which could prompt a stronger monetary response.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - May 15
US drilling slumps as gas rigs at one-year low: Baker Hughes
Quantum Commodity Intelligence – North American drilling activity was sharply lower as the number of rigs drilling for gas tumbled by the most in seven years the week ending 12 May, oilfield services firm Baker Hughes reported.
The total weekly rig count was down by 17 units to 731, the biggest weekly drop since June 2020, when the pandemic led to a major slowdown in exploration activity. The overall count is now just 2% above year-ago levels.
Rigs drilling for natural gas were down by 16 to 141, the steepest weekly fall since February 2016, and now eight rigs lower compared to the same time last year. < Market forces will force higher natural gas prices.
The number of rigs dedicated to crude fell by two to 586, which was the lowest since last June but up 23 on the year.
Texas lost two rigs to stand at 366 units but 21 more than a year ago, while the Permian Basin, spanning West Texas and New Mexico, was down three rigs at 353 for an increase of 18 on the year.
Haynesville led the declines, dropping five rigs, while no major producing basin registered an increase.
NYMEX WTI trading on the Chicago Mercantile Exchange settled on Friday (12 May) at $70.04/b for the Jun23 contract, down 1.8% on the week.
Front-month Jul23 ICE Brent futures closed at $74.17/b, down 1.5 % over the same timeframe.
Natural gas improved slightly with the Jun23 Henry Hub contract on NYMEX closing at $2.30/mmBtu on Friday but hovering just above two-year lows.
Spot natural gas prices were again hit by mild spring temperatures and pipeline maintenance, along with plentiful supplies. The market remains in a contango structure, with the Nov23 contract closing above $3/mmBtu on Friday.
Quantum Commodity Intelligence – North American drilling activity was sharply lower as the number of rigs drilling for gas tumbled by the most in seven years the week ending 12 May, oilfield services firm Baker Hughes reported.
The total weekly rig count was down by 17 units to 731, the biggest weekly drop since June 2020, when the pandemic led to a major slowdown in exploration activity. The overall count is now just 2% above year-ago levels.
Rigs drilling for natural gas were down by 16 to 141, the steepest weekly fall since February 2016, and now eight rigs lower compared to the same time last year. < Market forces will force higher natural gas prices.
The number of rigs dedicated to crude fell by two to 586, which was the lowest since last June but up 23 on the year.
Texas lost two rigs to stand at 366 units but 21 more than a year ago, while the Permian Basin, spanning West Texas and New Mexico, was down three rigs at 353 for an increase of 18 on the year.
Haynesville led the declines, dropping five rigs, while no major producing basin registered an increase.
NYMEX WTI trading on the Chicago Mercantile Exchange settled on Friday (12 May) at $70.04/b for the Jun23 contract, down 1.8% on the week.
Front-month Jul23 ICE Brent futures closed at $74.17/b, down 1.5 % over the same timeframe.
Natural gas improved slightly with the Jun23 Henry Hub contract on NYMEX closing at $2.30/mmBtu on Friday but hovering just above two-year lows.
Spot natural gas prices were again hit by mild spring temperatures and pipeline maintenance, along with plentiful supplies. The market remains in a contango structure, with the Nov23 contract closing above $3/mmBtu on Friday.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - May 15
Trading Economics
"WTI crude futures rose 2% to above $71 per barrel on Monday, after declining for four straight weeks, as investors are anticipating tightened supplies resulting from OPEC+ cuts and the resumption of US Strategic Reserve purchases. Despite concerns about fuel demand in the United States and China, global crude supplies could tighten in the second half as the OPEC+ group is making additional output cuts that are reducing sour crude volumes. The group announced in April that some members would cut output further by around 1.16 million barrels per day, bringing the total volume of cuts to 3.66 million bpd. Additionally, the United States could start repurchasing oil for the Strategic Petroleum Reserve (SPR) after completing a congressionally mandated sale in June, and the leaders of the Group of Seven (G7) nations could announce new measures that target sanctions evasion involving third countries and undermine Russia's future energy production." < Team Biden is still draining the SPR and I doubt they will refill it anytime this year.
"US natural gas futures (JUN23) rose above $2.35/MMBtu, the highest in two weeks, due to concerns over a possible future decline in production after data showed that energy companies had reduced the number of rigs for drilling gas. The recent report from Baker Hughes showed that the gas rig count fell by 16 to 141 last week, the lowest since April 2022, and the biggest weekly decline since February 2016. Still, average gas output in the US Lower 48 states held steady at a record of 101.4 bcfd so far in May. However, US natural gas prices are still down by more than 40% since the beginning of 2023 and remain close to have remained near two-year lows due to warmer weather that has reduced demand while supply has remained plentiful. The weather in the US Lower 48 states is projected to switch from warmer-than-normal levels to near-normal from May 18-27, and US gas demand, including exports, is expected to fall from 91.7 billion cubic feet per day (bcfd) this week to 89.0 bcfd next week." < The JUL23 NYMEX contract is currently at $2.53/MMBtu.
"WTI crude futures rose 2% to above $71 per barrel on Monday, after declining for four straight weeks, as investors are anticipating tightened supplies resulting from OPEC+ cuts and the resumption of US Strategic Reserve purchases. Despite concerns about fuel demand in the United States and China, global crude supplies could tighten in the second half as the OPEC+ group is making additional output cuts that are reducing sour crude volumes. The group announced in April that some members would cut output further by around 1.16 million barrels per day, bringing the total volume of cuts to 3.66 million bpd. Additionally, the United States could start repurchasing oil for the Strategic Petroleum Reserve (SPR) after completing a congressionally mandated sale in June, and the leaders of the Group of Seven (G7) nations could announce new measures that target sanctions evasion involving third countries and undermine Russia's future energy production." < Team Biden is still draining the SPR and I doubt they will refill it anytime this year.
"US natural gas futures (JUN23) rose above $2.35/MMBtu, the highest in two weeks, due to concerns over a possible future decline in production after data showed that energy companies had reduced the number of rigs for drilling gas. The recent report from Baker Hughes showed that the gas rig count fell by 16 to 141 last week, the lowest since April 2022, and the biggest weekly decline since February 2016. Still, average gas output in the US Lower 48 states held steady at a record of 101.4 bcfd so far in May. However, US natural gas prices are still down by more than 40% since the beginning of 2023 and remain close to have remained near two-year lows due to warmer weather that has reduced demand while supply has remained plentiful. The weather in the US Lower 48 states is projected to switch from warmer-than-normal levels to near-normal from May 18-27, and US gas demand, including exports, is expected to fall from 91.7 billion cubic feet per day (bcfd) this week to 89.0 bcfd next week." < The JUL23 NYMEX contract is currently at $2.53/MMBtu.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - May 15
U.S. natural gas futures rallied Monday after Baker Hughes reported a sharp drop in the number of active U.S. drilling rigs, suggesting a slowdown in production activity.
Total active gas drilling rigs in the U.S. sank by 16 to stand at 141, the lowest total since April 2022 and the biggest weekly decline since February 2016, Baker Hughes reported Friday.
Front-month Nymex natural gas (NG1:COM) for June delivery closed +4.8% to a two-week high $2.375/MMBtu.
The rig drop was well rec'd by the market. We may have seen the bottom
Total active gas drilling rigs in the U.S. sank by 16 to stand at 141, the lowest total since April 2022 and the biggest weekly decline since February 2016, Baker Hughes reported Friday.
Front-month Nymex natural gas (NG1:COM) for June delivery closed +4.8% to a two-week high $2.375/MMBtu.
The rig drop was well rec'd by the market. We may have seen the bottom