OPEC Cuts!
Market Update
Crude Oil
Today, WTI is trading at $88.22/ bbl. The prompt month contract traded up on Wednesday afternoon after OPEC+ announced a 2mm bbls/d production cut. After the OPEC+ announcement, Goldman raised their Brent forecast to $110/bbl while JP Morgan raised theirs to $100/ bbl. Today, Brent is trading at $94.09/bbl.
On Wednesday, OPEC+ recommended to cut 2mm bbls/d for November production. The White House responded by saying, “the Biden Administration will also consult with Congress on additional tools and authorities to reduce OPEC’s control over oil prices.” The White House went on to say, “Today's announcement is a reminder of why it is so critical that the United States reduce its reliance on foreign sources of fossil fuels.” The US has plans to release an additional 10mm bbls/d from the SPR during November.
The EIA Petroleum Status Report for the week ending September 30th, 2022 was released on Wednesday, there was a 1.4mm bbl draw from the previous week. Cushing storage increased another week by 0.3mm bbls. Refinery run rates had a increased from the prior week to 91.3% utilization. Crude production stayed flat from the previous week at 12mm bbls. Crude imports and exports both decreased from the prior week.
www.eia.gov/petroleum/supply/weekly
Rig Count Update:
The U.S. O&G rig count gave up four of the huge 18 rig gain from the previous week, and now sits at 878 - oil rigs picking up a rig to 667 with gas rigs dropping five to 211. The Permian basin was the biggest mover, dropping four as well to 348, but still 82 rigs higher year on year. The other major plays kept steady on the week, either losing/picking up a rig or staying flat. The SCOOP-STACK added a rig to 48, now ~50% from a year ago. The Bakken has remained flat now for four consecutive weeks.
Natural Gas
After opening the week at $6.80, Natural Gas prices have remained in the upper $6 range this week before bouncing above $7 mid-week. Russia’s continued curtailment of gas flows to Europe had international prices hitting record highs in the 3rd Qtr. The crisis casts much uncertainty on the market as Europe continues to look to LNG imports to offset the reduction of Russian gas supplies. The Freeport LNG terminal is still expected to resume production early next month and expects to ramp up to 2 bcf/d by the end of November.
Midcontinent cash prices are trading higher after moving down to close out September. With the basis gap closing, ANR-OK is coming in $.16 off Henry Hub at $5.90, NGPL-Midcon is $.35 back at $5.71 and Chicago City-gates Nov contract is bouncing around a $.38 discount. With above average temperatures greeting the first few days of October, a welcoming cooling trend should help push heating demand past last year’s levels. Outflows in the region are at their highest level in the past two months, with East Canada showing the biggest gain of 1.6 Bcf/d, which in turn has total net flows in the region the lowest since the beginning of August (S&P Global Insights.) Look for the demand forecast to remain relatively stable until the temps shift toward the cooler fall weather trend. While the latest weather models do have near term temps cooling off across the Midwest and South, we may still be several weeks away from a shift to heating demand.
The EIA released storage numbers this morning, coming in at 3,106 Bcf, representing a net +129 Bcf increase from the previous week. This increase was slightly above marketplace expectations of +125. Stocks were 165 Bcf higher this time last year, however, this week’s levels are still within the 5 yr. historical range of 3,370 Bcf.
Natural Gas Liquids (NGLs)
Products across the board were higher compared to prior week numbers. Ethane at both Mont Belvieu and Conway led the way, spiking 12% and 11%, respectively. All others were 2-7% higher on the week, with the exception of Isobutane’s in Conway, which took a deep cut at 13%.
Talk Energy Podcast
This episode’s guest is Mark Mills. Mark is a senior fellow at the Manhattan Institute and a strategic partner with Montrose Lane (an energy-tech venture fund). Mark also served in the White House Science Office under President Reagan.
This episode we discuss the issue energy misinformation that is being spread in the media and by politicians. We talk about the limitations of the energy transition and what is actually working and what is science fiction.
We dive into the issues facing renewables and electric vehicles. Lastly, we discuss why when it comes to energy, the narratives dominate, but ultimately the facts matter.
Hope you enjoy the show!
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