Thursday, March 29th, 2018
Oil & Gas Weekly Market Update March 23, 2018
Crude Oil: The week began with little fundamental news in the crude markets, and like many recent trading sessions, prices took direction from stocks and currencies. Given the lack of news, most traders appeared to be positioning for another report of higher crude inventories mid-week. WTI for May delivery would edge lower by $0.28 Monday to settle at $62.13; the May contract became the front-month contract Wednesday with the expiration of the April contract Tuesday. Crude marched higher Tuesday as Saudi Crown Prince Mohammed bin Salman’s visit to Washington raised the prospect of a more aggressive stance toward Iran. Adding to the bullish sentiment was news from the Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC) that global crude will come into balance by the end of September, sooner than previous forecasts according to the JMMC. May WTI added $1.41 Tuesday to settle at $63.54. EIA released its weekly Petroleum Status Report on Wednesday and the data was quite bullish (see table at bottom right for more detail). Crude inventories surprised to the upside and fell counter to expectations for another build and there were also solid draws in products. WTI climbed higher for a second consecutive day, up $1.63 Wednesday to settle at $65.17. Global markets were pressured Thursday as the White House announced potential new tariffs on $60B of Chinese goods, raising fears that the potential for curtailed trade could negatively impact global economic growth. WTI lost $0.87 Thursday to settle at $64.30. Crude rebounded strongly Friday as some traders weighed increased geopolitical risks from Washington’s stance on Iran. Adding to the upside move was new out of Saudi Arabia, OPEC’s de facto leader, where Energy minister Khalid al-Falih reiterated their commitment to lowering a global crude surplus. WTI for May delivery would push higher by $1.58 Friday to settle at $65.88. Over the past week (Friday-to-Friday), May WTI added $3.47 or 5.6%. (Sources: CME 3/19-23/18; WSJ 3/19-23/18)
Natural Gas: EIA released weekly gas storage data Thursday and reported an 86 BCF withdrawal to stockpiles, just over 3% below expectations. As reference, a 136 BCF withdrawal was reported last year and the 5-year average for the same week was a 56 BCF withdrawal. Total storage now stands at 1.446 TCF and widened to a 329 BCF deficit to the 5-year average (withdrawal season runs November thru April). U.S. dry production rose by 10.2% versus last year. Natural gas demand fell by 4.7% week-over-week but was 0.7% higher versus year-ago levels. Year-over-year demand growth was driven by gains in LNG export (+33%) and relative stability across the rest of the natural gas demand spectrum. March forecasts continue to trend colder, and the latest forecast is for this year’s winter season to finish around 5% colder than normal. Despite the cold weather, record levels of production continue to put a lid on prices as we continue to see natural gas pressured across the strip. Over the EIA’s report week (Wednesday-to-Wednesday) the Henry Hub spot price rose by 4¢ to $2.70/MMBtu. On the NYMEX, the front month futures contract lost 9.3¢ to $2.638/MMBtu Wednesday. The 12-month strip (currently the average of the April 2018 thru March 2019 futures contracts) also fell this past week, lower by 7.6¢ to $2.836/MMBtu. (Sources: EIA 3/22/18; CME 3/21/18)
- Tuesday, TPG Pace Energy (a blank check acquisition firm backed by TPG) reached a deal to acquire all the Eagle Ford assets from multiple EnerVest managed funds for $2.42B. The assets cover ~360,000 NMA and produce ~38,800 BOPD. Once completed, TPG Pace will rename itself Magnolia Oil and Gas and partner with EnerVest to operate the assets.
- Monday, Bill Barrett completed its $650MM strategic combination with Fifth Creek Energy and announced the newly combined firm will be called HighPoint Resources Corporation.
- Monday, SandRidge Energy announced its Board rejected the unsolicited offer by Midstates Petroleum made in February to combine the two firms. While reviewing this offer, SandRidge received unsolicited offers from others. These proposals are all being formerly evaluated.
See more Oil & Gas Market Updates
Coachman Energy Operating Company’s Weekly and Quarterly Oil & Gas Market Updates provide an aggregate look at various trends in the oil and gas industry. CEOC and any third parties listed are separate and unaffiliated and are not responsible for each other’s products, services or data. Information is provided for educational purposes only.
by Randy Kenworthy