Tuesday, March 13th, 2018
Oil & Gas Weekly Market Update ~ March 9, 2018
The U.S. has been a net energy importer since 1953, but in the EIA’s latest Annual Energy Outlook 2018 Reference case, the group projects the U.S. will become a net energy exporter by 2022. This is driven by continued development of U.S. tight oil and gas resources coupled with modest energy consumption growth. (EIA 2/6/18)
Crude Oil: Crude markets began the week much like last week with reports of more supply disruptions in Libya over the weekend. Some outlets were reporting that Libyan production fell by around 380,000 BOPD. Continued uncertainty in Venezuela (both political and economic) are also helping support crude prices as production by this OPEC member continues its precipitous fall. WTI for April delivery moved up $1.32 Monday to settle at $62.57. Over the past number of weeks, crude has taken some cues from the global equity and currency markets. On a more fundamental basis, traders continued to be caught between the bearish view of rising U.S. output, and bullish efforts by OPEC and other major producers including Russia to restrict output. With little news directly out on energy Tuesday, WTI bounced between gains and losses but managed to eke out a $0.03 gain to settle at $62.60. EIA released its weekly Petroleum Status Report on Wednesday and the data was shaded bearish (see table at bottom right for more detail). Total inventories built nearly three times expectations. Compounding the problem was another large step-up in production. WTI fell over $1.00 on this news and by the end of the day had lost $1.45 Wednesday to settle at $61.15. Crude was under selling pressure throughout Thursday’s session as Wednesday’s losses extended another day. Traders’ fears were also elevated as they await decisions from the White House on steel and aluminum tariffs and the potential effect on trade and global economic growth. WTI fell $1.03 Thursday to settle at $60.12. Crude moved steadily higher Friday. Bullish sentiment returned following the release of positive economic data which also buoyed the equity markets. Adding to this positive sentiment was news of the possibility of a meeting between President Trump and North Korean leader Kim Jong Un. WTI for April delivery would sprint higher by $1.92 Friday to settle at $62.04. Over the past week (Friday-to-Friday), April WTI added $0.79 or 1.3%. (Sources: CME 3/5-9/18; WSJ 3/5-9/18)
Natural Gas: EIA released weekly gas storage data Thursday and reported a 57 BCF withdrawal to stockpiles, over 3% below expectations. As a reference, a 57 BCF withdrawal was reported last year and the 5-year average for the same week was a 129 BCF withdrawal. Total storage now stands at 1.625 TCF and narrowed to a 300 BCF deficit to the 5-year average (withdrawal season runs November thru April). U.S. dry production rose by 9.0% versus last year. Natural gas demand rose by 2.5% week-over-week and was 5.9% higher versus year-over-year levels. Year-over-year demand growth was driven by gains in LNG export (+127%) and residential/commercial heating (+6.7%) demand centers. Temps this past week, especially east of the Rockies, were above normal. Weather forecasts for the balance of March remain cooler than normal, but many traders are beginning to look towards the summer injection season. While this was supportive of prices this past week, 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 16¢ to $2.77/MMBtu. On the NYMEX, the front-month futures contract added 11.0¢ to $2.777/MMBtu Wednesday. The 12-month strip (currently the average of the April 2018 thru March 2019 futures contracts) also rose this past week, up by 9.9¢ to $2.934/MMBtu. (Sources: EIA 3/8/18; CME 3/7/18)
This week IHS hosted it highly influential 37th Annual IHS CERAWeek conference in Houston. Industry, government, policymakers, and various other energy thought leaders from around the world gathered at the week-long conference.
- Wednesday, Devon announced it had reached an agreement to sell its southern Barnett Shale assets to an undisclosed buyer for $553MM. The assets encompass ~30,000 NMA and currently produce ~200 MMCFE/d.
- Last Friday, Dominion Energy confirmed a ship carrying the first cargo of liquefied natural gas (LNG) produced for export departed Thursday, March 1, from the Cove Point LNG terminal. This marks the second operational LNG export facility in the Lower 48 states. When fully functioning, Cove Point could process around 750 MMCF/d of natural gas.
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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