August 21, 2020

August 21, 2020
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  • WTI is down 42c to $42.40/Bbl, and Brent is down 44c to $44.46/Bbl
  • Oil prices edged lower as the coronavirus pandemic continues to muddy the demand outlook
    • Europe has been battling to control a new spike in virus cases, causing concerns over energy consumption and challenging growth
    • Oil futures have been unable to move above their recent five-month highs. This week the Federal Reserve and OPEC+ cast doubt on the outlook for the global economy and oil demand respectively
  • U.S. oil exports to China are set to reach a record next month, a sign that Beijing is stepping up purchases to meet its commitments under a landmark deal reached earlier this year (Bloomberg)
    • Crude buyers in China have chartered about 19 tankers for September to send about 37 MMBbl to China
    • Under phase of the U.S.-China trade deal, the world’s largest oil importer promised to buy an additional $200 billion of U.S. goods and services in 2020 and 2021, including $52 billion in energy products
  • Libya’s government announces a cease-fire Friday, a move that could be a boost for reopening oil fields
    • The most recent conflict in Libya pitted the internationally recognized government in the west against the Russian-supported military commander Khalifa Haftar in the east
    • The civil war has reduced Libya’s oil output from over 1 MMBbl/d in January to less than 100 MBbl/d currently
  • Natural gas is down 4.0c to $2.312/MMBtu
  • U.S. LNG cargoes cancellations are expected to ease in October
    • Less than 10 cargoes are expected to be cancelled in the month of October, according to Bloomberg. This is in stark contrast to the 50 cargo cancellations in July, 35-45 in August, and 20-30 in September
    • In August, European and Asian spot prices have rallied more than the U.S. Henry Hub benchmark, creating a widening arbitrage opportunity for U.S. cargoes
    • AEGIS notes U.S. exports to Asia could increase as JKM prices are boosted by the shutdown of units at Chevron’s 2.0 Bcf/d Gorgon LNG facility
  • Cal ’21 Waha is providing an excellent level to start layering protection in with the current value of the strip trading above -$0.39/MMBtu
    • It may be hard for the Cal ’21 strip to see continued improvement as the forwards are very tight to both NGPL-Midcon and Chicago
    • The Chicago forward curve would likely need to rise in order to allow the NGPL-Midcon forward curve to improve, thus allowing Waha to continue to rally in the Cal ’21 tenor
  • The EIA reported a storage build of 43 Bcf for the week ending August 14
    • Total stocks are now at 3,375 Bcf with the end-of-season storage number being offered at 3,995 Bcf on ICE
    • The build was smaller than both last year’s 56-Bcf injection during the corresponding week, and the five-year average of 44 Bcf

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