Ancova Energy Markets Update
July 14, 2022
“Large explosion at Medford ONEOK gas plant under investigation” -KOKH 25
At the time of the newsletter, WTI was trading at $94.85/bbl. Crude prices continue to decline with increased inventory build, decreased jet fuel demand and concerns of an impending recession.
The U.S. Treasury Secretary, Janet Yellen, is pushing for a price cap on Russian oil. India and China are the largest buyers of Russian crude. For the price cap to be implemented, India and China would need to agree to the price cap. This concept has been received with mixed reactions. There are concerns that Russia could retaliate by halting all exports or simply not accepting the cap.
The EIA Petroleum Status Report for the week ending July 8th, 2022 reflected a crude inventory increase of 3.3 mm bbls. Domestic crude production had a minor decrease from the prior week at 12.0mm bbls. Refinery run rates remained the same as the prior week and continue to run at max rates at 94% utilization. Jet fuel supplied had a large decrease from the prior week at 1.5mm bbls.
Natural Gas futures have followed an upward trend and landed in the mid-$6 range this week. Hot weather continues to move across the nation and AC cooling demand has been on the rise. Other newsworthy items this week include the ONEOK Natural Gas facility fire and the Nord Stream Pipeline maintenance. The weekend facility fire looks to be substantial, and the plant has been halted until further notice. The Nord Stream Pipeline shut down on Monday for maintenance has speculation building over the possible restart once the 10-day repairs are complete. The 8 – 14 day forecast looks to be well above normal for most of the US and Texas is facing the possibility of rolling blackouts. With natural gas inventories still below the 5-year average, the extra pull on demand should continue the bullish force to prices.
Midcon prices rose more than $.22 to start the week and have remained above the $6 mark despite a lower trend in production and demand. ANR-OK comes in $0.40 off Henry Hub at $6.23 while NGPL-Midcon is $.39 back at $6.24. Production in the region has faced a steady decline in July, averaging 8.6 Bcf/d. According to Platts Analytics, no regional outages have been reported, attributing the production decline to ongoing maintenance. With early July temperatures coming in 3 degrees below normal, total demand has declined to 13.55 Bcf/d.
The EIA released storage numbers this morning, coming in at 2,369 Bcf, representing a net +58 Bcf increase from the previous week. This increase was slightly above marketplace expectations. Stocks were 252 Bcf higher this time last year, however, this week’s levels are still within the 5 yr. historical range of 2,688 Bcf.
Natural Gas Liquids (NGLs)
All Mont Belvieu product spot prices were down on the week, with the exception of Purity Ethane (+10%): Propane (-4%), N. Butane (-6%), Isobutane (-11%) and N. Gasoline (-6%). Conway price movements were slightly less: Propane (-1%), N. Butane (-3%), Isobutane (-8%). Ethane and N. Gasoline were both higher WoW at 8% and 3%, respectively. Prompt-month Ethane prices for both MB and Conway jumped 12% from prior week.
According to Oneok representatives (off the record) there are no current business continuity issues as a result of the explosion at Oneok’s NGL fractionation plant in Medford, OK on Saturday. The company’s NGL pipelines are interconnected and have the ability to divert liquids for processing/fractionation further north in Kansas facilities. The investigation is ongoing and company officials admit it could take several weeks to determine the cause. More importantly there were no reported injuries, according to those same officials.
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