Oil & Gas Prices - Feb 21

[dan_s]

Trading Economics:
WTI Oil
WTI crude oil futures (MAR25) dipped below $71 per barrel but were still set for a 1.5% weekly gain, driven by concerns over supply disruptions in Russia and improving demand outlook.
> Russia reported a 30%-40% reduction in Caspian Pipeline Consortium oil flows after a Ukrainian drone attack on a pumping station.
> Meanwhile, analysts are expecting cold US weather and increased Chinese industrial activity to boost demand.
> At the same time, in the US, crude oil stockpiles rose, while gasoline and distillate inventories fell due to seasonal refinery maintenance.
> Also, investors were monitoring developments over the Ukraine peace negotiations. Tensions between Zelensky and Trump escalated earlier in the week after Trump called Zelenskiy "a dictator without elections" and suggested Ukraine had started the war. However, after meeting Trump's envoy Thursday, Zelenskiy said Ukraine was ready to quickly forge a strong investment and security deal with the U.S. < Now that Team Trump (lead by Elon Musk) has exposed the bribery and fraud used to get more $billions from Team Biden, Zelenskiy should end the war quickly and disappear. As I have posted here many times, the senseless wars are just money laundering scams. MY WAG: Over $100 billion never went to fund the war effort. Even some weapons intended for Ukraine were sold into Africa. The media's lack of coverage is shameful.

Natural Gas
US natural gas futures rose more than 17% to $4.30/MMBtu, hitting a 25-month high as cold weather strained supply and boosted demand.
> Prices surged as an Arctic blast boosted heating demand while freezing oil and gas wells, disrupting production.
> Forecasts indicate colder-than-normal temperatures across the Lower 48 states through February 22, keeping consumption high.
> At the same time, output has dropped by 6.7 bcfd over the past 15 days to a four-week low of 100 bcfd on Thursday.
> Supply constraints worsened as gas flows to LNG export plants hit record levels, averaging 15.5 bcfd in February, up from 14.6 bcfd in January. Daily LNG feedgas set a new record of 16.4 bcfd on Wednesday, exceeding Tuesday’s 16.2 bcfd.
> Additionally, EIA data showed a larger-than-expected 196 bcf storage draw last week, much higher than the 100 bcf withdrawal in the prior period, further tightening supply.

MY TAKE on Natural Gas:
> We should see 7 more draws from storage before the "Refill Season" begins on April 5.
> CelsiusEnergy's forecast for the week ending February 21 is a draw of 272 Bcf, 130 Bcf above the 5-year average.
> My forecast (Wild Ass Guess) is that the next 7 draws (ending April 4) will total 665 Bcf. If so, natural gas in storage will be 1,436 Bcf on April 4, which is approximately 300 Bcf below the 5-year average at the end of the winter heating season.
> Last year, there was 2,286 Bcf in storage the beginning of April, 2024. 2,286 - 1,436 Bcf = 850 Bcf lower year-over-year
> Keep in mind that (a) refilling storage is not optional, (b) demand for U.S. natural gas is MUCH HIGHER today than the 5-year average, and (c) lack of pipeline takeaway capacity in Appalachia and the Permian Basin makes it impossible for us to "Drill Baby Drill" are way out of this supply deficit.

My prediction is that if storage builds in April and May are lower than normal thanks to rising LNG exports, we will see the Bidding War for supply in the futures market shift into high gear in June.