Current Market Pricing
Crude Oil
The prompt month WTI contract (Aug 2023) closed yesterday’s session $0.92 higher to $75.75/bbl. Crude has experienced a steady increase/rally over the last few weeks (~$7/bbl/12%) on overall sentiment that inflation is slowing and interest rates may have hit a ceiling. OPEC supply cuts and a weaker US Dollar index (near par 100) have also been supportive of crude prices. The EIA released its crude storage numbers yesterday - a bearish 5.9mm bbl build from the previous week, but the boost in the overall macro-economic picture is clearly outweighing any moves in the storage markets (note that Cushing stocks dropped 1.6mm bbls).
Despite several positive factors driving crude prices higher, the International Energy Agency (IEA, and not to be confused with the EIA) has cut its oil demand growth forecast for the first time this year. Yet still at record highs of 102.1mm bpd, the pace of growth was lowered 0.2mm bpd from last month’s projection. China is forecasted to account for roughly 70% of the global oil demand growth at 2.2mm bpd - not much of a surprise as the country was one of the last (and slowest) to ease Covid restrictions. The IEA has also warned that with significant OPEC cuts and falling rig counts, we could be in for a global supply crunch, another bullish factor for crude prices.
The Aug 2023 WTI contract is up slightly around the lunch hour today, currently trading $0.21 higher at $75.96/bbl.
www.eia.gov/petroleum/supply/weekly
U.S. Rig Count
Total rigs drop eight on the week to 737 and dipping to lows not seen since March 2022. The SCOOP+STACK combined basin with its three-rig drop to 31 is now at its lowest level since late 2021. Oil focused rigs dropped a total of nine (eight of those coming out of the Permian) to 593 while gas focused rigs added a net one increase (thanks for non-core basins) to 144.
Natural Gas
Natural Gas futures have lived in the $2.70 range this week as heat indexes have pushed above the 100-degree mark in much of the southern plains. With production at record levels and storage sitting well above the five-year average, the elevated demand has yet to remove the cap from prices. The severe heat looks to remain through the weekend, but the longer-term forecast does send cooler weather to the northeast. European temps are elevated as well; however, most analysts believe high storage levels should handle the strong demand with ease. While prices remain in a bullish structure, time will tell if the heat can stick around long enough and fend off the bears.
Natural gas spot prices have slipped in the Midcon, as demand declined. Chicago city-gates spot prices come in a $.18 discount to Henry Hub while NGPL is $.24 back and ANR is $.29. In the futures market, Chicago city-gates is $.28 discount to Henry Hub while ANR OK and NGPL Midcon are $.35 and $.34 back. According to S&P Global Commodity Insights data, total demand in the Midcon was forecasted to hit 14.26 Bcf/d, a decrease of 186 MMcf/d. Power demand, however, looks to remain unchanged at 6.77 Bcf/d. In the Midcon producing region, residential-commercial demand was expected to come in at 1.88 Bcf/d.
The EIA released storage numbers this morning, coming in at 2,930 Bcf, representing a net +49 Bcf increase from the previous week. This increase was slightly more than marketplace expectations of +45 Bcf increase. Stocks were 569 Bcf less this time last year and come in 364 Bcf above the 5 yr. historical range of 2,566 Bcf.
Natural Gas Liquids
NGL prices in both markets came roaring back in lock-step with WTI. All products saw double digit gains with the exception of MB N. Butane (+8%) and Conway N. Gasoline (+4%). Conway Ethane saw the biggest increase at 27% compared to week ago prices. All other products in both markets increased in a range of 11% to 19% compared to same period last week.
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