April 7, 2020

April 7, 2020
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  • WTI is up 44c to $26.52/Bbl, and Brent is up 76c to $33.81/Bbl
  • Oil prices are higher this morning as Saudi Arabia and Russia close in on an output deal, according to people familiar with the matter (Bloomberg)
    • Both countries will talk with other OPEC+ nations on Thursday before a G-20 meeting of energy ministers Friday
    • President Trump said he will decide what to do if OPEC asks the U.S. to cut oil output at Thursday’s meeting. He also said that a free market would automatically curb American production
    • AEGIS notes to be cautious about a material rally in the short-term, even if global producers agree on collaborative supply cuts. Demand losses still far exceed what is possible to cut.
  • Permian flaring by producers decline as completions slow, according to Rystad Energy
    • Flaring has reached the lowest levels since late 2018. 1Q flaring was 700 MMcf/d, down from an all-time high of nearly 900 MMcf/d in 3Q2018, according to Rystad estimates
    • The amount of gas flared in the Permian could be reduced to 330 MMcf/d or more as producers complete fewer wells and if operators shut-in wells because they run out of storage, the report said
  • The WTI prompt spread weakened on Monday, nearing its lowest level since 2011
    • WTI May-June spread fell $1.34 to -$3.90/Bbl on Monday; reached as low as -$4.16 early Tuesday
    • The stronger contango comes as the physical barrel is having trouble finding enough demand
  • Natural gas is up 7.8c to $1.809/MMBtu
  • Prompt-Month gas prices continue to remain volatile with prices rallying close to 17% from Friday’s open
    • This rally could be attributed to the addition of 53 HDDs over the last week-and-a-half as a cool pattern emerges across the continental U.S.
    • The Commodity Weather Group has their April HDD estimate at 370 HDDs, good enough to be the six coolest April in the last 20 years
  • Exxon Mobil announced a reduction in capital expenditures from $33 Billion to $23 Billion, a decline of roughly 30%
    • The largest of these reductions will come from the Permian Basin
    • Exxon is also delaying a final investment decision on its 2.0 Bcf/d Rovuma LNG project, as well as foregoing work on its Guyana oil discoveries
  • Feedgas deliveries to Sabine Pass have dropped 0.8 Bcf/d due to maintenance on NGPL pipeline (Platts)
    • This helps explain the sharp drop in total U.S. feedgas demand from 9.0 Bcf, on April 1, to 7.7 Bcf by April 6
    • Work began on the pipeline on Friday, April 3, and is expected to be completed by April 9

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