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Daily First Look
Daily briefNarciso Cano

Natural gas extends gains ahead of weekend winter weather

Crude rebounds on renewed geopolitical risk

  • The WTI prompt-month contract rose $1.21 to $60.57/Bbl on Friday morning (7:45 AM CT)
  • President Trump said the U.S. has an “armada” heading toward Iran, prompting the market to reprice geopolitical risk
    • U.S. officials said warships, including an aircraft carrier and guided-missile destroyers, are expected to arrive in the Middle East in the coming days
  • Meanwhile, oil production at Kazakhstan’s Tengiz oilfield has yet to resume following a fire that forced a shutdown earlier this week
  • The EIA reported a crude stockpile build of 3.6 MMBbls last week

Stockpiles slow to build (Goldman Sachs)

  • Global stock builds slowed to 700 MBbl/d over the past two weeks, undershooting expectations amid disruptions to Kazakh supply and colder weather
    • This compares with an average build of 1.7 MMBbl/d over the prior four weeks
  • OECD commercial inventories accounted for “essentially all” of the estimated global builds over the past two weeks
  • Oil-on-water peaked earlier this month but remains elevated
    • While Russia, Iran, and Venezuela account for only ~14% of global production, they represent roughly two-thirds of current oil stored on water

Natural gas trades higher after intense intraday volatility

  • Yesterday and early this morning, The February Henry Hub contract traded in a range between $4.67/MMbtu and $5.665/MMbtu
  • February is on track to gain more than $2 this week, in the largest weekly price move in the history of Henry Hub
  • Freeze-offs have already begun impacting supply, with dry gas production down to 105.2 Bcf/d, according to data from S&P
  • Imports of gas from Canada have surged to more than 9 Bcf/d, helping to make up for the supply shortfall
  • Yesterday, the EIA reported a -120 Bcf withdrawal, which was larger than expected but smaller than the five-year average
    • Inventories are now 177 Bcf above the five-year average, but should tighten once data for next week is released on February 5

Winter storm threatens blackouts, widespread impacts (Bloomberg)

  • At least 170 million people are in areas likely to be impacted by what is expected to be one of the strongest winter storms in recent years
  • Electricity and spot gas prices have begun to rally, with off-peak ERCOT prices for this weekend and Monday trading as high as $1,000/MWh, and west Texas gas prices trading to $12/MMbtu for this weekend
  • Prolonged power outages could impact some regions amid snow and ice

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