Select Market Pricing
Crude Oil
The June 2023/prompt-month contract closed yesterday’s session $1.15 lower to $72.56/bbl as EIA released storage #s showing a 3mm bbl build on the week. Expectations were for another drawdown but inventories are still ~5.8mm bbls below the 5yr average. In contrast, gasoline and distillate inventories both showed meaningful declines at 3.2mm and 2.9mm bbls, respectively. The USD has also been trending higher on the week which typically puts pressure on the WTI price. The feds announced this week that they will begin filling up the Strategic Petroleum Reserves (“SPR”) later on this year. The SPR currently sits at a four-decade low. The administration directed the largest sale ever (180mm bbls) from the reserves last year in an attempt to boost supply and in turn reduce gasoline prices at the pump. The contract is trading just slightly lower in today’s session - currently off $0.16 at $70.92/bbl.
www.eia.gov/petroleum/supply/weekly
Rig Count Update
The WoW rig count added a net four to 802 despite the Permian losing five, climbing back above 800 after falling below the week prior. The big pickup on the week was surprisingly in the Haynesville, where it added six rigs for a total of 67. The gas basin has been lingering around the 80-rig level for the last two years, but has recently dropped into the 60s as a result of horrid gas prices. The overall rig count has steadily fallen since January 2023, where it peaked at 866. Oil producers have consistently communicated that an uptick would materialize in Q2 of this year - time will tell as the commodity environment thus far in 2023 has created uncertainty across the board.
Natural Gas
The Natural Gas futures market opened at $2.148 on Monday and traded higher mid-week with heat indices in the plains pushing into the 90’s and the northeast forecast pushing some cold weather demand. US LNG exports continue to hit record highs and overall supply looks to remain elevated. With production as much as 3% over last year’s levels and storage well above the 5-year average, prices continue to be capped. While mostly mild temps are forecasted in the US, it will take a major weather event to be the savior and help bring storage back to normal levels. With talks of an “El Nino” type summer, the excessive heat could move prices quickly, until then, look for the market to stay in the bearish structure.
With the demand forecast continuing to weaken, Midcon spot prices fell across the board. Chicago city-gates fell $.20 to $1.80/MMBtu, while Oneok and NGPL are $.31 and $.36 back respectively. In the futures market, Chicago city-gates is $.25 back from Henry Hub, while ANR OK and NGPL Midcon are $.31 and $.35 back. Total demand in the Midcon was projected to drop to 12.9 Bcf/d, a decrease of 879 MMcf/d. In the Midcon production region, however, demand was expected to increase to 3.2 Bcf/d, with power demand adding 11 MMcf/d and residential adding 51 MMcf/d. According to S&P Global, the weather forecast looks to bring thunderstorms and isolated tornadoes to the area over the next few days, which could shake things up a bit.
The EIA released storage numbers this morning, coming in at 2,141 Bcf, representing a net +78 Bcf increase from the previous week. This increase was slightly less than marketplace expectations of +80 Bcf increase. Stocks were 509 Bcf less this time last year and come in 332 Bcf above the 5 yr. historical range of 1,809 Bcf.
Natural Gas Liquids
Minus Ethane, products in both markets rebounded significantly this week compared to the steep falloff from a week ago. Conway Isobutanes added 18% while all others added between 6%-9% in value. Ethane in both MB and Conway dropped 1% and 11%, respectively.
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