August 18, 2020

August 18, 2020
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  • Oil traded near five-year highs in New York, supported by a weak dollar
    • The greenback is the lowest in 18 months as of Tuesday
    • Oil is priced in dollars, therefore, when the dollar falls, goods priced in it become cheaper relative to other currencies
  • Gauges of Brent and WTI volatility fell to the lowest levels since January on Monday
    • WTI’s 2nd-month implied volatility fell to 29.4%, while Brent’s slipped to 29.5%, both were the lowest since January (Bloomberg)
    • Brent curve structure weakness continued as the October-November spread widened 2c to contango of -55c/Bbl on Monday, the weakest since May
  • The number of drilled but uncompleted (DUC) wells in the sevens major shale basins rose by 30 in July, the Energy Information Administration (EIA) said on Monday
    • The total number of DUC wells increased to 7,685 in July, driven by a 40-well increase in the Permian basin, according to the EIA’s monthly Drilling Productivity Report
    • The amount of DUC wells is declining in some basins as producers run through inventories of DUC wells while scaling back on new drilling
  • LNG feedgas rebound underway as flows hit highest levels in months
    • Feedgas flows were 4.9 Bcf/d on Monday, August 17, the highest level reached since June 25, still far removed from the high of 9.5 Bcf/d reached in April
    • Feedgas flows at Sabine Pass are up nearly 800 MMcf/d, from .7 Bcf/d to 1.5 Bcf/d. Freeport LNG flows were zero toward the end of July but have since returned to around .4 Bcf/d
  • Record temperatures in California fuel rally in local natural gas prices (Platts)
    • SoCal city-gate basis reaches $10.93/MMBtu, highest since February 2019
    • Demand on both the Southern California Gas and Pacific Gas & Electric systems has remained high since Aug. 14, averaging 2.87 Bcf/d and 2.64 Bcf/d, respectively, up around 630 MMcf/d (22%) and 700 MMcf/d (27%) compared with the month-to-date average, according to data from Platts Analytics
  • As demand remains elevated in the western half of the United States, especially California, basis locations such as Sumas, Malin, Northwest Rockies, and CIG have a seen pop in the front of their forward curves
    • Producer-area basis locations, like CIG, are up approximately $0.10/MMBtu in the front, while NW Rox has improved by $0.25/MMBtu
    • Demand center basis locations, like Sumas or Malin, have improved by $0.25/MMBtu to $0.30/MMBtu

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