Oil & Gas Prices - Nov 8

[dan_s]

Opening Prices:
> WTI is down $0.47 to $76.90/bbl, and Brent is down $0.45 to $81.16/bbl.
> Natural gas is down -3.7c to $3.103/MMBtu.

AEGIS Notes
Oil

Oil trades lower as the dollar continues to rally
The US Dollar index has climbed over the past few days, adding bearish pressure to crude prices

The EIA released their short-term energy outlook yesterday and decreased their forecast for OPEC spare capacity from 4.1 MMBbl/d in 2023 to 3.7 MMBbl/d and from 4.9 MMBbl/d to 4.3 MMBbl/d in 2024

Chinese oil demand outlook worsening (BBG)
Chinese crude and product inventories are building, refining margins are falling, and the anticipated jump in air travel demand has materialized as strongly as expected
Chinese crude imports did increase by 7% in October, however, that was following a 13% decline in September
Margins at independent Chinese refineries turned negative in late October for the first time since early January due to low fuel prices and high crude prices

Shifts in Middle East oil supply are making lighter oil cheaper (BBG)
The premium for Abu Dhabi’s Murban crude, which is one of the most sought-after Middle Eastern crudes, has fallen from $5/Bbl in January to only 50c
The change has been attributed to Saudi Arabia’s prolonged supply cuts and expectations that Abu Dhabi’s Ruwais refinery will switch to a different crude slate
The decrease in Murban premium has also reduced the attractiveness of similar grades produced in the US and Africa as part of a broader trend in which heavier crudes have become more expensive than lighter crudes

Natural Gas

Natural gas prices extend losses to $3.103/MMBtu after yesterday’s 12c decline
The Winter ‘23/’24 strip is down 8.6c to $3.249, and the Summer ’24 strip is down by 6.9c to $3.247

This morning's forecast shows cooler temperatures east of the Rockies and significantly warmer Rockies and West over the next 15 days
Overall Lower 48 temp curve remains similar to yesterday’s run, averaging mid-50s over the next two weeks

DT Midstream plans to bring its 1 Bcf/d LEAP Gillis access interconnect online by 2Q2024 (S&P)
DT Midstream's 1 Bcf/d LEAP Gillis Access Interconnect project is set to come online by Q2 2024, increasing Haynesville supply to Gulf Coast, according to a spokesperson during 3Q earnings call
The company completed 300 MMcf/d Phase 1 in Aug 2023, taking gathering capacity on the lateral pipeline in the Haynesville to 1.3 Bcf/d
Additional 400 MMcf/d Phase 2 is expected by Q1 2024, 200 MMcf/d Phase 3 by Q3 2024, taking Haynesville capacity to 1.9 Bcf/d
DT says there is potential to expand the line to 3 Bcf/d. The company is in “active discussions” for a fourth phase of expansion on LEAP, said CEO Slater

New bank capital rules could sting energy hedging, warn stakeholders (S&P)
New capital rules (Basel III Endgame) proposed could raise energy companies' commodity hedging costs and limit capital for clean energy development, said stakeholders to CFTC on Nov. 6
The rules proposed in July by the Federal Reserve, OCC, and FDIC aim to standardize and strengthen bank capital requirements to reflect risks better
The proposed rules could increase required capital for banks' trading activities by 20% and $880 billion (157%) over current approaches, impacting market risk, CVA, and trading-related operational risks, according to the International Swaps and Derivatives Association
“Our concern is that we could see a reduction in the availability of liquidity for end users either due to a reduction in capacity” from bank-affiliated swap dealers and futures commission merchants or through an increase in prices,” said JP Morgan’s Toks Oyebode

[aja57]

Oil looks like it’s technically headed to a support around 72. If that breaks down looks like Biden will get his wish around 66. Saudis ain’t gonna be happy with paper traders .

[dan_s]

Closing Prices:
> Prompt-Month WTI (Dec 23) was down $-2.04 on the day, to settle at $75.33
> Prompt-Month Henry Hub (Dec 23) was down $-0.034 on the day, to settle at $3.106

A lot of the Paper Traders trade these futures contracts on margin. IMO these selloffs are fueled by margin calls until a support lever holds.

I know there is a lot of noise about lower Chinese demand for oil, but so far I have not seen any evidence that OECD petroleum inventories have stopped falling. Volatility seems to be feeding on itself.