Oil & Gas Prices - Aug 24
Posted: Sat Aug 24, 2024 8:55 am
Trading Economics:
Oil
WTI crude oil futures advanced 2.5% to settle at $74.8 per barrel on Friday, following remarks by Federal Reserve Chair Jerome Powell, suggesting the central bank is ready to cut interest rates.
Powell supported easing Fed policies, noting that further job market weakening would be undesirable, and expressed confidence that inflation is nearing the Fed's 2% target. Lower interest rates typically stimulate economic growth, which boosts oil demand.
However, despite Friday's gains, oil prices declined more than 2% for the week due to concerns about slowing energy demand. Among the batch of data pointing to lower fuel demand, the newest S&P PMI showed that US manufacturing activity fell more than expected in August.
This added to signs of lower fuel demand from other top energy consumers, headlined by contractionary PMIs, slowing industrial production, and ship-tracking data pointing to lower fuel deliveries in China during July.
My notes from Keith Kohl's hour long update on the global oil market
> Per EIA 914 report: U.S. oil production declined from April to May. May actual production much lower than EIA's weekly estimates.
> OPEC likely to extend production quotas through mid-2025. OPEC will defend the oil price and they want Brent over $80/bbl.
> U.S. gasoline demand remains higher than expected.
> Oil price spike on July 30 was FEAR of Iran attack on Israel. It did not and oil prices pulled back, but risk of Iran attacking Israel is still out there.
> Geopolitical risk to supply is still high. Ukraine taking the war inside Russia is a BIG DEAL. Russian infrastructure is at risk.
> Venezuela: Recent election was a fraud and everyone knows it. Biden has ignored it, but U.S. should slap sanctions back on Venezuela, which will take up to 500,000 bpd of oil supply off the market.
> China's economy is slowing buy not on decline. India's rising oil demand more than offsets a slowdown in China's demand.
> Trump's "America First" agenda will not be a quick increase in supply.
> Non-OPEC supply not as high as expected by IEA: U.S. flat and may be declining, Brazil had a major supply outage in June, Canada has upside and the U.S. needs more heavy oil from Canada, Guayana production not coming on line as soon as expected.
> OPEC+ controls the oil price.
> M&A will continue: BIG OIL has strong balance sheets and lots of cash. Buffet may increase his oil exposure. D&C costs down so well level economics in the U.S. are very strong at $75 WTI.
Trading Economics
Natural Gas
US natural gas futures dropped over 5%, nearing $2.0 per MMBtu, after the Energy Information Administration (EIA) reported a larger-than-expected storage increase.
> U.S. utilities added 35 billion cubic feet of natural gas to storage for the week ending August 16, surpassing market expectations of a 27 billion cubic feet increase. This build pushed storage levels 12.6% above the five-year average, reflecting an ongoing supply surplus.
> In response, major producers like EQT and Coterra Energy are reducing output and delaying projects to better manage the excess supply. Looking ahead, analysts anticipate that this surplus will lead to lower consumer prices for natural gas this winter, driven by strategic stockpiling efforts.
MY TAKE: Since April 19 weekly storage builds have been below the 5-year average 16 of 17 weeks. That trend will continue, and storage will not fill before winter begins mid-Nov. Big new LNG export facility at Plaquemine, Louisiana now expected to come online by end of September. LNG Altimira FLNG 1 is online taking U.S. gas. Cheniere's Corpus Christi Train 3 should be online mid-Q4. By year-end, outlook for natural gas prices should be much better. Rebalancing is a "process" that takes time.
Oil
WTI crude oil futures advanced 2.5% to settle at $74.8 per barrel on Friday, following remarks by Federal Reserve Chair Jerome Powell, suggesting the central bank is ready to cut interest rates.
Powell supported easing Fed policies, noting that further job market weakening would be undesirable, and expressed confidence that inflation is nearing the Fed's 2% target. Lower interest rates typically stimulate economic growth, which boosts oil demand.
However, despite Friday's gains, oil prices declined more than 2% for the week due to concerns about slowing energy demand. Among the batch of data pointing to lower fuel demand, the newest S&P PMI showed that US manufacturing activity fell more than expected in August.
This added to signs of lower fuel demand from other top energy consumers, headlined by contractionary PMIs, slowing industrial production, and ship-tracking data pointing to lower fuel deliveries in China during July.
My notes from Keith Kohl's hour long update on the global oil market
> Per EIA 914 report: U.S. oil production declined from April to May. May actual production much lower than EIA's weekly estimates.
> OPEC likely to extend production quotas through mid-2025. OPEC will defend the oil price and they want Brent over $80/bbl.
> U.S. gasoline demand remains higher than expected.
> Oil price spike on July 30 was FEAR of Iran attack on Israel. It did not and oil prices pulled back, but risk of Iran attacking Israel is still out there.
> Geopolitical risk to supply is still high. Ukraine taking the war inside Russia is a BIG DEAL. Russian infrastructure is at risk.
> Venezuela: Recent election was a fraud and everyone knows it. Biden has ignored it, but U.S. should slap sanctions back on Venezuela, which will take up to 500,000 bpd of oil supply off the market.
> China's economy is slowing buy not on decline. India's rising oil demand more than offsets a slowdown in China's demand.
> Trump's "America First" agenda will not be a quick increase in supply.
> Non-OPEC supply not as high as expected by IEA: U.S. flat and may be declining, Brazil had a major supply outage in June, Canada has upside and the U.S. needs more heavy oil from Canada, Guayana production not coming on line as soon as expected.
> OPEC+ controls the oil price.
> M&A will continue: BIG OIL has strong balance sheets and lots of cash. Buffet may increase his oil exposure. D&C costs down so well level economics in the U.S. are very strong at $75 WTI.
Trading Economics
Natural Gas
US natural gas futures dropped over 5%, nearing $2.0 per MMBtu, after the Energy Information Administration (EIA) reported a larger-than-expected storage increase.
> U.S. utilities added 35 billion cubic feet of natural gas to storage for the week ending August 16, surpassing market expectations of a 27 billion cubic feet increase. This build pushed storage levels 12.6% above the five-year average, reflecting an ongoing supply surplus.
> In response, major producers like EQT and Coterra Energy are reducing output and delaying projects to better manage the excess supply. Looking ahead, analysts anticipate that this surplus will lead to lower consumer prices for natural gas this winter, driven by strategic stockpiling efforts.
MY TAKE: Since April 19 weekly storage builds have been below the 5-year average 16 of 17 weeks. That trend will continue, and storage will not fill before winter begins mid-Nov. Big new LNG export facility at Plaquemine, Louisiana now expected to come online by end of September. LNG Altimira FLNG 1 is online taking U.S. gas. Cheniere's Corpus Christi Train 3 should be online mid-Q4. By year-end, outlook for natural gas prices should be much better. Rebalancing is a "process" that takes time.