Oil & Gas Prices - June 30
Posted: Fri Jun 30, 2023 9:17 am
Opening Prices:
> WTI is up $0.74 to $70.60/bbl, and Brent is up $0.52 to $74.86/bbl.
> Natural gas is down -0.8c to $2.693/MMBtu.
AEGIS Notes
Oil
Oil heads for a monthly gain despite a fourth straight quarterly loss
> August ’23 WTI gained 80c this morning to trade around $70.64/Bbl
> Crude found support this week following a substantial U.S. inventory drop of 9.6 MMBbl, much higher than Bloomberg's 1.2 MMBbl forecast
> High inflation, interest rate hikes, and a relatively slow recovery in Chinese manufacturing and consumption have weighed on prices in recent months. However, Saudi Arabia's additional 1 MMBbl/d output cut in July, in addition to OPEC+’s production cut agreement through 2024, supports prices < Per Rystad Energy, the global oil market is under-supplied by 2.4 million barrels today and the oil market will be extremely tight by the end of Q3. If this is confirmed by IEA in their month "Oil Market Reports", we should see much higher oil prices by year-end. Goldman Sachs, UBS and Raymond James all agree that the oil market is under-supplied.
Saudi Arabia Under Pressure to Sustain Output Cut Amid Weak Prices (Bloomberg)
> Saudi Arabia’s additional voluntary 1 MMBbl/d production cut is set to come into effect on July 1
> Despite the cut averting deeper price drops, crude prices have continued to trade sideways
> Energy Minister Prince Abdulaziz bin Salman said he’d keep the market “in suspense” on whether the measure would remain in place in August and beyond
> Some analysts expect that an extension for at least one more month would be prudent amid moderate demand recovery and a weaker economic outlook
> FGE consultants expect Saudi Arabia to continue its oil cuts into August, potentially lowering exports to 6 MMBbl/d from April 7.52 MMBbl/d
ECB Faces Challenge as Euro-Area Core Inflation Surges (Bloomberg)
> Euro area’s core inflation which excludes volatile items like food and fuel, surged to 5.4% in June, hindering ECB's plans for interest rate hikes
> Persistent high inflation may push ECB to continue raising rates while grappling with balancing the risks of prolonged inflation and achieving its 2% target
Natural Gas
Natural gas prices are lower, heading for the first weekly loss in three weeks
> Lower 48 weather forecasts were unchanged; however, the South Central region’s forecast warmed by 14.4 °F < A high percentage of the electricity in the South Central region comes from natural gas fired power plants that will be running a max capacity to keep the AC on.
> Although next week is forecast to be the warmest of the season so far; forecasts indicate temperatures will be relatively close to the 10-year average over the next two weeks
> LNG feedgas flows remain stable at around 12.5-Bcf/d, as Sabine Pass returns from maintenance and is now taking about 4-Bcf/d out of a total capacity of 5-Bcf/d
Alaskan utilities look towards LNG as domestic gas supply declines (S&P)
> According to a recent report, gas supplies from the Cook Inlet of Alaska may fall short of demand by 2027
> The Cook Inlet gas field is the primary source of natural gas for space heating and power generation in the region
> Utilities are considering several options, which include constructing an 800-mile pipeline from Alaska’s North Slope, increased exploration of the Cook Inlet, or converting a mothballed LNG export facility into an import terminal
> The LNG solution appears to be the favored choice, as the pipeline would take several years and come at a high cost, and while the cook inlet has a large potential for new discoveries, there appears to be low interest in drilling
> This leaves converting the shuttered ConocoPhillips LNG export plant on the Kenai Peninsula into an imported plant as the most likely solution
> WTI is up $0.74 to $70.60/bbl, and Brent is up $0.52 to $74.86/bbl.
> Natural gas is down -0.8c to $2.693/MMBtu.
AEGIS Notes
Oil
Oil heads for a monthly gain despite a fourth straight quarterly loss
> August ’23 WTI gained 80c this morning to trade around $70.64/Bbl
> Crude found support this week following a substantial U.S. inventory drop of 9.6 MMBbl, much higher than Bloomberg's 1.2 MMBbl forecast
> High inflation, interest rate hikes, and a relatively slow recovery in Chinese manufacturing and consumption have weighed on prices in recent months. However, Saudi Arabia's additional 1 MMBbl/d output cut in July, in addition to OPEC+’s production cut agreement through 2024, supports prices < Per Rystad Energy, the global oil market is under-supplied by 2.4 million barrels today and the oil market will be extremely tight by the end of Q3. If this is confirmed by IEA in their month "Oil Market Reports", we should see much higher oil prices by year-end. Goldman Sachs, UBS and Raymond James all agree that the oil market is under-supplied.
Saudi Arabia Under Pressure to Sustain Output Cut Amid Weak Prices (Bloomberg)
> Saudi Arabia’s additional voluntary 1 MMBbl/d production cut is set to come into effect on July 1
> Despite the cut averting deeper price drops, crude prices have continued to trade sideways
> Energy Minister Prince Abdulaziz bin Salman said he’d keep the market “in suspense” on whether the measure would remain in place in August and beyond
> Some analysts expect that an extension for at least one more month would be prudent amid moderate demand recovery and a weaker economic outlook
> FGE consultants expect Saudi Arabia to continue its oil cuts into August, potentially lowering exports to 6 MMBbl/d from April 7.52 MMBbl/d
ECB Faces Challenge as Euro-Area Core Inflation Surges (Bloomberg)
> Euro area’s core inflation which excludes volatile items like food and fuel, surged to 5.4% in June, hindering ECB's plans for interest rate hikes
> Persistent high inflation may push ECB to continue raising rates while grappling with balancing the risks of prolonged inflation and achieving its 2% target
Natural Gas
Natural gas prices are lower, heading for the first weekly loss in three weeks
> Lower 48 weather forecasts were unchanged; however, the South Central region’s forecast warmed by 14.4 °F < A high percentage of the electricity in the South Central region comes from natural gas fired power plants that will be running a max capacity to keep the AC on.
> Although next week is forecast to be the warmest of the season so far; forecasts indicate temperatures will be relatively close to the 10-year average over the next two weeks
> LNG feedgas flows remain stable at around 12.5-Bcf/d, as Sabine Pass returns from maintenance and is now taking about 4-Bcf/d out of a total capacity of 5-Bcf/d
Alaskan utilities look towards LNG as domestic gas supply declines (S&P)
> According to a recent report, gas supplies from the Cook Inlet of Alaska may fall short of demand by 2027
> The Cook Inlet gas field is the primary source of natural gas for space heating and power generation in the region
> Utilities are considering several options, which include constructing an 800-mile pipeline from Alaska’s North Slope, increased exploration of the Cook Inlet, or converting a mothballed LNG export facility into an import terminal
> The LNG solution appears to be the favored choice, as the pipeline would take several years and come at a high cost, and while the cook inlet has a large potential for new discoveries, there appears to be low interest in drilling
> This leaves converting the shuttered ConocoPhillips LNG export plant on the Kenai Peninsula into an imported plant as the most likely solution