Oil & Gas Prices - Nov 3

[dan_s]

Opening Prices:
> WTI is up $0.71 to $83.17/bbl, and Brent is up $0.57 to $87.42/bbl. < WTI went down over a dollar soon after the markets opened.
> Natural gas is up 3.3c to $3.505/MMBtu.

MY TAKE: Oil Price volatility will continue to be high because of the War in Israel and lots of other "White Noise" (Fear of the Fed, Fear of Recession, Confusion in Washington, What will OPEC do next?).
Fundamentals drive natural gas prices, and weather forecasts will be the primary driver of gas prices through year-end. Plenty of ngas in storage to meet winter space heating demand, but a normal winter and YOY increase in LNG exports should balance the U.S. gas market.
Potential for an under-supplied U.S. natural gas market in 2H 2024 exists.

AEGIS Notes
Oil

Oil prices were up as much as $1.50/Bbl to $83.60 Friday morning, but trading remained choppy as the dollar weakened and the market continued to digest the Middle East war
Federal Reserve chair Jerome Powell hinted the central bank may forego future rate hikes
There are concerns that the physical oil market is looser after the EIA reported stock builds yesterday, and oil curve structure has weakened

Traders pulled forward their expectations for the first US rate cut to June from July (Bloomberg)
Fed swaps now show 30 basis points of easing by June, up from 23 bps prior to this morning's payroll data
Unemployment ticked up to 3.9%, and non-farm payroll employment increased by 150k jobs- below pre-report estimates

WTI curve structure has flattened with the pullback in headline prices
The WTI prompt spread (Month 1 – Month 2) has contracted to +34c from a peak of +$2.38/Bbl
Analysts point to growing inventories amid weaker refinery demand coupled with sluggish demand data from China as a reason why oil prices have lost strength (GS, Bloomberg)

Natural Gas

Prompt month natural gas heads for a weekly gain
The Winter ‘23/’24 strip is up 5.1c this morning at $3.649, and the Summer ’24 strip is up 4c at $3.485

The EIA reported a 79 Bcf natural gas injection, increasing inventories to 3,779 Bcf, surpassing last year's and the five-year average by 293 Bcf and 205 Bcf, respectively
Upcoming cold spells are expected to be milder than this week's, with temperatures near the 10-year normal, but the week ending November 17 is forecast to be the coldest yet

US sanctions Russia’s major Arctic LNG 2 project (Bloomberg)
On Thursday, the U.S. imposed sanctions on Novatek PJSC's Arctic LNG2 project (19.8 Mtpa), a key part of Russia's plan to triple LNG production by 2030
Novatek's Arctic facility, set to start its first production train later this year, faces an uncertain future due to these sanctions
These measures may exacerbate global LNG supply concerns, especially considering Japan’s dependence on Russian LNG and the existing uncertainties over Egypt's LNG exports

ONEOK expects FID on Saguaro pipeline by year-end (S&P) < ONEOK is in our High Yield Income Portfolio
ONEOK expects a final investment decision on the Saguaro gas pipeline to Mexico by late 2023, pending FERC approval
The 48-inch pipeline, stretching 155 miles, will carry 2.8 Bcf/d from Texas's Waha hub to a new LNG facility in West Mexico
High interest from Permian Basin producers and support from major customers is driving momentum for the project set to boost LNG exports, said ONEOK’s executive VP Swords
ONEOK also aims to finish the West Texas NGL Pipeline loop by early 2025, tripling its capacity to 0.74 MMBbl/d and extending it to the Fort Worth area

[dan_s]

Closing Prices:
> Prompt-Month WTI (Dec 23) was down $-1.95 on the day, to settle at $80.51
> Prompt-Month Henry Hub (Dec 23) was up $0.043 on the day, to settle at $3.515

All of our upstream companies are EXTREMELY PROFITABLE AT $80 OIL AND $3.50 NGAS.