December 3, 2019

December 3, 2019
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  • WTI is down 29c to $55.67/Bbl, and Brent is down 43c to $60.49/Bbl
  • Trade talks between the U.S. and China continue to be stalled over President Trump’s unwillingness to lift previously imposed tariffs, although Trump expects to still finalize an interim trade deal (Reuters)
    • Trump also announced plans yesterday to reimpose tariffs on steel and aluminum from Brazil and Argentina
    • The president’s rhetoric, along with data showing contracting US factory data in November, stymied oil’s early morning price surge yesterday
  • Saudi Arabia priced its lighter oil grade at the largest premium to heavier crude since 2014 for sales to Asian customers at the beginning of 2020 (Bloomberg)
    • The light to heavy oil spread for Saudi Arabian oil stands at just over $6/Bbl, a far cry from an average of ~$3/Bbl for the past few years
    • Saudi Arabia’s pricing shows the effects of the impending IMO 2020, a new maritime rule that should aid demand for less-sulfurous fuel
  • Hedge funds increased their net-long position on WTI to levels not seen since late September for the week ending November 26 (CFTC)
    • Outright long positions from speculators were increased by 31k contracts to stand at 238k
    • Short positions were decreased by 33k contacts to stand at 39.9k
    • AEGIS notes the increase in speculative net-long positions come as oil (WTI) hit ~$58/Bbl (on 11/26), a level not seen since around the time when Saudi oil infrastructure was attacked in September
  • Natural gas is up 7.0c to $2.399/MMBtu
  • Pipeline operator Williams is filing a lawsuit against the Texas Railroad Commission over its decision to allow Exco Operating Company to flare its gas (PointLogic)
    • Exco is arguing that it is uneconomical to transport its gas on Williams’ gathering system given their rates, despite already being connected to the line
    • The decision could effectively open up companies to argue that their contracts are uneconomic as well from a gas standpoint and, in turn, they could seek exemption from flaring rules so that they may focus on extracting and marketing more valuable oil
    • Flaring should persist as a major problem in the Permian until Kinder’s Permian Highway Pipeline comes online in 1H 2021
  • The prompt month gas contract is up $0.08/MMBtu this morning as weather models added approximately 13 Heating Degree Days on re-emerging colder weather in the back of the forecast
    • However, the January contract is still off $0.07/MMBtu from Friday’s open when it dropped $0.22/MMBtu
  • The CFTC reported open short positions increased by 48,373 contracts to 291,745 contracts total for the week ended November 26
    • Comparatively, long positions increased by 1,852 contracts to total 108,539 contracts

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