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Last Look - Prompt gas slides 11.2c toward close to finish at $3.24; WTI gains $1.24 to $72.12

May 7, 2021

  • Iran nuclear talks resume, as diplomats convened for the fourth round of negotiations to have Iran adhere to its nuclear agreements in exchange for sanctions relief
    • According to Bloomberg, a U.S. diplomat said on Thursday, “that an agreement could be reached this month
    • AEGIS notes that if sanctions are removed on Iran then up to 1.5 MMBbl/d of supply could return to the market
  • U.S. demand for jet fuel slated to jump 20% in June, to exceed 1 MMBbl/d - (Bloomberg)
    • Demand over the next four weeks stands at around 850 MBbl/d, as implied by scheduler passenger flights
    • Domestic flights will account for 80% of demand, as the COVID-19 situation has limited international demand
  • USGC refining margins sustain record-highs not seen since Hurricane Harvey in 2017 - (Argus)
    • Gulf coast refining margins, as measured against WTI Houston crude based on a 3-2-1 yield, rose to $18.90/bl this week, the second-highest level since September 2017
    • Refinery runs have increased since Winter-Storm Uri but remain below pre-COVID levels. A strong surge in gasoline demand this summer could give refiners the boost needed to reach pre-COVID levels
  • On Friday morning, the natural gas curve was nearly flat to last week’s Friday settle. Longer-dated tenors did rise a few pennies, but the prompt contract and Summer 2021 strip were unchanged
    • Weather for May is forecast to be toward the top of the last 20 years in terms of natural gas weighted heating degree days (HDDs) at 165 (Commodity Weather Group)
    • May is typically one of the lowest months for overall demand as temperatures in high demand regions average closer to 65°F than other months
    • The following 6-10 days of model runs show widespread below-average temperatures across the Lower 48 and more normal temps in the 11-15 day window for the US
  • Natural gas storage added 60 Bcf for the week ended April 30 - much lower than the build in 2020 for the same week
    • The rise in inventories was closely in line with what analysts were expecting
    • Inventories now stand at 1.958 Tcf and are 345 Bcf below the year-ago level of 2.303 Tcf and 61 Bcf less than the five-year average storage level of 2.019 Tcf
    • AEGIS models continue to show a tight daily supply and demand environment. Strong export demand from LNG and Mexico coupled with lower supply are contributing factors to the market tightness
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