Opening Prices:
> WTI is down $1.59 to $83.95/bbl, and Brent is down $1.42 to $89.06/bbl.
> Natural gas is down -12.2c to $3.361/MMBtu.
AEGIS Notes
Oil
Oil is trading lower, reversing gains from Friday
Prices rallied 3% on Friday amid news that Israel had expanded military operations against Hamas
Saudi Arabia may pause price hikes for oil delivered to Asia (BBG)
Saudi Aramco is expected to keep pricing for Arab Light crude delivered to Asia for December delivery unchanged due to weak refinery margins undercutting demand for oil cargoes
While Brent and WTI futures have risen since the October 7 attack on Israel, the physical market has shown signs of softening as fuel prices have fallen and freight rates have increased
According to consulting firm OilChem, refining margins at China’s largest state-owned refiners are close to break-even levels, while smaller processors are being pushed to curb their output
World Bank warns that supply disruption could send oil prices above $100/Bbl (BBG)
The World Bank said that a disruption due to crude supplies could take between 500 MBbl/d to 2 MMBbl/d off the market
The bank said that a larger escalation of conflict in the Middle East could lead to a 3-5 MMBbl/d disruption, and the biggest disruption would be 6-8 MMBbl/d, similar in magnitude to the 1973 Arab oil embargo
They forecast oil prices at $157/Bbl under the largest disruption scenario, while their baseline is for prices to average $90/Bbl in the current quarter before averaging $81/Bbl next year
MY TAKE: There is just an incredible amount of noise impacting the oil price, so expect some wild swings in the price. OPEC meeting this week should provide some real information on how tight the market really is. All of our model portfolio companies are extremely profitable at today's oil and gas priice.
Natural Gas
The now prompt December contract traded 14c lower Monday morning as weather models showed a warmer pattern over the weekend for the next two weeks
Weather-driven demand losses were mostly isolated to the 6-10 day window. There was a loss of 10.2 HDDs (13 Bcf) for same-day changes from Friday (CWG)
EQT announced last week that it has booked all of its MVP capacity with two utilities
The US’s largest gas producer by production announced long-term contracts for a combined 1.2 Bcf/d of deliveries through the Mountian Valley Pipeline (S&P Global)
The contracts are with two utilities in the Southeast and start in 2027
EQT said it has no plans to produce significantly more gas to fill the contracts and instead expects the outbound gas to come from volumes the company already produces
AEGIS notes that the 2 Bcf/d MVP pipeline needs downstream upgrades or expansions on the Transco mainline in order to flow at material rates
Oil & Gas Prices - Oct 30
Oil & Gas Prices - Oct 30
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - Oct 30
From AP this morning:
The World Bank reported Monday that oil prices could be pushed into “uncharted waters” if the violence between Israel and Hamas intensifies, which could result in increased food prices worldwide.
The World Bank’s Commodity Markets Outlook found that while the effects on oil prices should be limited if the conflict doesn’t widen, the outlook "would darken quickly if the conflict were to escalate."
The attack on Israel by the militant organization Hamas and the ensuing Israel military operation against Hamas have raised fears of a wider Mideast conflict.
And the threat of escalation looms. Israeli tanks and infantry pushed into Gaza over the weekend as Israeli Prime Minister Benjamin Netanyahu announced a “second stage” in the war. Hamas officials have called for more regional assistance from allies, including Iran-backed Hezbollah in Lebanon.
The World Bank report simulates three scenarios for the global oil supply in the event of a small, medium or large disruption.
Effects should be limited if the conflict doesn’t widen in a “small disruption” scenario — as oil prices are expected to decline to an average of $81 a barrel next year, the World Bank estimates.
But during a “medium disruption” — equivalent to the disruptions experienced during the Iraq war — the global oil supply would decline by 3 million to 5 million barrels per day, driving oil prices up possibly by 35%. In a “large disruption” scenario — comparable to the Arab oil embargo of 1973 — the global oil supply would shrink by 6 million to 8 million barrels per day and prices could go up by 56% to 75%, or $140 to $157 a barrel, according to the report.
Indermit Gill, the World Bank’s chief economist, said Russia's invasion of Ukraine has already had disruptive effects on the global economy “that persist to this day.”
"If the conflict were to escalate, the global economy would face a dual energy shock for the first time in decades — not just from the war in Ukraine but also from the Middle East,” Gill said.
Ayhan Kose, the World Bank’s deputy chief economist, said higher oil prices will inevitably result in higher food prices.
“If a severe oil price shock materializes, it would push up food price inflation that has already been elevated in many developing countries" as a result of Russia's Ukraine invasion, Kose said. “An escalation of the latest conflict would intensify food insecurity, not only within the region but also across the world."
Overall, oil prices have risen about 6% since the start of the conflict. And gold — a commodity that tends to rise in periods of conflict — has increased roughly 8%, according to the World Bank.
Some analysts are skeptical that the U.S. would experience massive oil shortages, since U.S. oil production is at an all-time high.
At a Bloomberg event on Thursday, Treasury Secretary Janet Yellen said the Biden administration was monitoring the economic consequences of Israel’s war against Hamas carefully.
“So far, we have not yet seen much that has global consequences,” she said, but if the war spreads “of course there could be more meaningful consequences.”
International Energy Agency Executive Director Fatih Birol said between Russia's invasion and the latest violence between Israel and Hamas in Gaza, “no one can convince me that oil and gas are safe and secure energy choices for countries or consumers."
The World Bank reported Monday that oil prices could be pushed into “uncharted waters” if the violence between Israel and Hamas intensifies, which could result in increased food prices worldwide.
The World Bank’s Commodity Markets Outlook found that while the effects on oil prices should be limited if the conflict doesn’t widen, the outlook "would darken quickly if the conflict were to escalate."
The attack on Israel by the militant organization Hamas and the ensuing Israel military operation against Hamas have raised fears of a wider Mideast conflict.
And the threat of escalation looms. Israeli tanks and infantry pushed into Gaza over the weekend as Israeli Prime Minister Benjamin Netanyahu announced a “second stage” in the war. Hamas officials have called for more regional assistance from allies, including Iran-backed Hezbollah in Lebanon.
The World Bank report simulates three scenarios for the global oil supply in the event of a small, medium or large disruption.
Effects should be limited if the conflict doesn’t widen in a “small disruption” scenario — as oil prices are expected to decline to an average of $81 a barrel next year, the World Bank estimates.
But during a “medium disruption” — equivalent to the disruptions experienced during the Iraq war — the global oil supply would decline by 3 million to 5 million barrels per day, driving oil prices up possibly by 35%. In a “large disruption” scenario — comparable to the Arab oil embargo of 1973 — the global oil supply would shrink by 6 million to 8 million barrels per day and prices could go up by 56% to 75%, or $140 to $157 a barrel, according to the report.
Indermit Gill, the World Bank’s chief economist, said Russia's invasion of Ukraine has already had disruptive effects on the global economy “that persist to this day.”
"If the conflict were to escalate, the global economy would face a dual energy shock for the first time in decades — not just from the war in Ukraine but also from the Middle East,” Gill said.
Ayhan Kose, the World Bank’s deputy chief economist, said higher oil prices will inevitably result in higher food prices.
“If a severe oil price shock materializes, it would push up food price inflation that has already been elevated in many developing countries" as a result of Russia's Ukraine invasion, Kose said. “An escalation of the latest conflict would intensify food insecurity, not only within the region but also across the world."
Overall, oil prices have risen about 6% since the start of the conflict. And gold — a commodity that tends to rise in periods of conflict — has increased roughly 8%, according to the World Bank.
Some analysts are skeptical that the U.S. would experience massive oil shortages, since U.S. oil production is at an all-time high.
At a Bloomberg event on Thursday, Treasury Secretary Janet Yellen said the Biden administration was monitoring the economic consequences of Israel’s war against Hamas carefully.
“So far, we have not yet seen much that has global consequences,” she said, but if the war spreads “of course there could be more meaningful consequences.”
International Energy Agency Executive Director Fatih Birol said between Russia's invasion and the latest violence between Israel and Hamas in Gaza, “no one can convince me that oil and gas are safe and secure energy choices for countries or consumers."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - Oct 30
Test
Last edited by Fraser921 on Mon Oct 30, 2023 12:31 pm, edited 1 time in total.
Re: Oil & Gas Prices - Oct 30
Why is crude getting crushed?
The market is up 509 points and energy is going the other way. This looks more than “noise”
The market is up 509 points and energy is going the other way. This looks more than “noise”
-
geraldlong
- Posts: 15
- Joined: Mon Nov 09, 2020 2:20 pm
Re: Oil & Gas Prices - Oct 30
Is it possible for government entities in the world to sway the futures market?
Re: Oil & Gas Prices - Oct 30
I don't think so.
dan said earlier;
- that Chinese refineries are breaking even on products so the solution is stop producing which lowers demand for crude and
- Saudi Aramco is expected to keep pricing for Arab Light crude delivered to Asia for December delivery unchanged due to weak refinery margins undercutting demand for oil cargoes"
If crude gets low enough, demand should pick up
I think today's selling in crude s overdone and its bouncing back off the lows
Also, maybe, producers are willing to hedge when prices move above $ 85. They do this by selling futures
dan said earlier;
- that Chinese refineries are breaking even on products so the solution is stop producing which lowers demand for crude and
- Saudi Aramco is expected to keep pricing for Arab Light crude delivered to Asia for December delivery unchanged due to weak refinery margins undercutting demand for oil cargoes"
If crude gets low enough, demand should pick up
I think today's selling in crude s overdone and its bouncing back off the lows
Also, maybe, producers are willing to hedge when prices move above $ 85. They do this by selling futures
Re: Oil & Gas Prices - Oct 30
I think Gerald’s question about government entities manipulating oil prices is valid. Agree 200% with Dan that the laws of supply demand should create higher oil prices but perhaps there has been a dislocation between physical price and paper price whereby the paper trading industry is 30x larger and tied to large investing conglomerates tied to governments. One can recognize the pattern over the last 40 plus years in gold. We don’t have capitalism anymore. We have investment oligopolies connected to big government. So the question is which I can’t answer, do the laws of supply and demand work in fascistic economies?
Re: Oil & Gas Prices - Oct 30
Keep in mind that OPEC is meeting this week and there is an incredible amount of "noise". Oil Price swings both ways will be with us for awhile. Geopolitical Noise is the worst kind.
Closing Prices:
> Prompt-Month WTI (Dec 23) was down $-3.23 on the day, to settle at $82.31
> Prompt-Month Henry Hub (Dec 23) was down $-0.131 on the day, to settle at $3.352
Trading Economics:
Oil
"WTI crude futures fell 4% to near $82 a barrel on Monday, close to two-week lows, as traders mull the economic and monetary policy outlook and the war in the Middle East. Israel expanded ground operations in Gaza over the weekend, and although the potential for a broader conflict persists, it seems to have temporarily eased. At the same time, traders await key monetary policy decisions from the Fed, the BoJ and the BoE and key economic data for China and the US to assess demand prospects. Meanwhile, the World Bank said it expected global oil prices to average $90 a barrel in the fourth quarter, and to drop to an average of $81 a barrel over next year, assuming the Middle East conflict does not escalate into a wider one. If, however, the conflict were to escalate and disrupt oil supplies, prices could shoot up by as much as 75% to $157 a barrel under the bank’s worst-case-scenario." < $81 to $157 is a WIDE RANGE FOR A WILD ASS GUESS. Just remember that all of our upstream companies are extemely profitable if WTI averages $81/bbl.
Natural Gas
"US natural gas futures eased toward the $3.3/MMBtu mark, retreating since touching the two-week high of $3.48/MMBtu on October 27th as markets continued to assess demand forecasts ahead of the winter season, against the backdrop of strong supply. The latest data from the EIA showed that US utilities added 74 billion cubic feet of gas into storage on the week until October 20th, below market expectations of an 80 billion cubic feet build, but sharply above the five-year average. Additionally, data from the LSEG showed that average US production averaged 103.9 billion cubic feet so far in October, on track to surpass the record high of 103.1 billion cubic feet from July. Still, the possibility of a stronger winter offset higher supply. Meteorologists noted that weather in the lower 48 US states is likely to be significantly colder than expected from the end of October to the start of November, increasing demand for gas-intensive heating." < They really are just guessing at current U.S. natural gas production. I think they estimate it down to the tenth of a bcfpd to make us think it is accurate. It is just another WAG.
Closing Prices:
> Prompt-Month WTI (Dec 23) was down $-3.23 on the day, to settle at $82.31
> Prompt-Month Henry Hub (Dec 23) was down $-0.131 on the day, to settle at $3.352
Trading Economics:
Oil
"WTI crude futures fell 4% to near $82 a barrel on Monday, close to two-week lows, as traders mull the economic and monetary policy outlook and the war in the Middle East. Israel expanded ground operations in Gaza over the weekend, and although the potential for a broader conflict persists, it seems to have temporarily eased. At the same time, traders await key monetary policy decisions from the Fed, the BoJ and the BoE and key economic data for China and the US to assess demand prospects. Meanwhile, the World Bank said it expected global oil prices to average $90 a barrel in the fourth quarter, and to drop to an average of $81 a barrel over next year, assuming the Middle East conflict does not escalate into a wider one. If, however, the conflict were to escalate and disrupt oil supplies, prices could shoot up by as much as 75% to $157 a barrel under the bank’s worst-case-scenario." < $81 to $157 is a WIDE RANGE FOR A WILD ASS GUESS. Just remember that all of our upstream companies are extemely profitable if WTI averages $81/bbl.
Natural Gas
"US natural gas futures eased toward the $3.3/MMBtu mark, retreating since touching the two-week high of $3.48/MMBtu on October 27th as markets continued to assess demand forecasts ahead of the winter season, against the backdrop of strong supply. The latest data from the EIA showed that US utilities added 74 billion cubic feet of gas into storage on the week until October 20th, below market expectations of an 80 billion cubic feet build, but sharply above the five-year average. Additionally, data from the LSEG showed that average US production averaged 103.9 billion cubic feet so far in October, on track to surpass the record high of 103.1 billion cubic feet from July. Still, the possibility of a stronger winter offset higher supply. Meteorologists noted that weather in the lower 48 US states is likely to be significantly colder than expected from the end of October to the start of November, increasing demand for gas-intensive heating." < They really are just guessing at current U.S. natural gas production. I think they estimate it down to the tenth of a bcfpd to make us think it is accurate. It is just another WAG.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil & Gas Prices - Oct 30
WSJ and Barron's are laying the reduction on oil prices to the lack of spread of the Israel and Hamas war to other countries, i.e. Iran. This was the take from Barron's:
Heightened geopolitical tension is raising the risks of an oil shock at a challenging moment. The world’s major central banks’ task of regaining inflation control is far from done, and the world economy is slowing. But that is only part of the picture. The recent spike in long-dated U.S. Treasury bond yields and a prospective wave of commercial real estate loan defaults are causing strain in the U.S. banking system.
So far international oil prices have been well-behaved, trading in a range of $85 to $90 a barrel, despite the outbreak of what is expected to be a long war between Israel and Hamas. However, if that war were to spread to the rest of the region including Iran, oil prices must be expected to spike to well above $100 a barrel.
Oil could surge to above $130 a barrel if attacks on energy infrastructure were to disrupt physical supply, according to Bank of America. But the shock could be far more severe. Were supply to fall by two million barrels a day, prices could rise above $150 a barrel.
Heightened geopolitical tension is raising the risks of an oil shock at a challenging moment. The world’s major central banks’ task of regaining inflation control is far from done, and the world economy is slowing. But that is only part of the picture. The recent spike in long-dated U.S. Treasury bond yields and a prospective wave of commercial real estate loan defaults are causing strain in the U.S. banking system.
So far international oil prices have been well-behaved, trading in a range of $85 to $90 a barrel, despite the outbreak of what is expected to be a long war between Israel and Hamas. However, if that war were to spread to the rest of the region including Iran, oil prices must be expected to spike to well above $100 a barrel.
Oil could surge to above $130 a barrel if attacks on energy infrastructure were to disrupt physical supply, according to Bank of America. But the shock could be far more severe. Were supply to fall by two million barrels a day, prices could rise above $150 a barrel.