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Daily First Look
Daily briefNarciso Cano

Crude Rockets Higher on Trump Escalation; Gas Reprices on Contract Roll and Weather

Crude jumps as Trump escalates Iran threats

  • The WTI prompt-month contract rose $1.96 to $65.17/Bbl on Thursday morning (7:30 AM CT)
  • President Trump stated the US naval fleet heading to the region is “ready, willing, and able to rapidly fulfill its mission, with speed and violence, if necessary.”
    • Strikes by the US could potentially impede flows from the Middle East which accounts for about a third of total global supply
  • The Iranian government has said it is ready to engage in a dialogue based on mutual respect but warned that “IF PUSHED, IT WILL DEFEND ITSELF AND RESPOND LIKE NEVER BEFORE,”
  • Bullish call options have traded at a premium to bearish puts for the longest period in roughly 14 months as traders brace for a potential conflict (Bloomberg)
    • Bullish option positioning has also increased at the fastest pace in at least six years

OPEC+ to keep supply pause in place

  • The group is currently on track to stick with Q1 supply pauses despite the recent surge in crude prices
  • The eight countries subject to quotas will meet over the weekend and review their supply policy for the month of March

Natural gas March contract up 13c to $3.841/MMBtu on contract roll

  • The February contract settled at $7.46/MMBtu, with March now assuming prompt-month status
  • Weather models continue to trend warmer for the first half of February, particularly across the Midwest, South Central, and Western regions
  • Northeast and Southeast forecasts continue to show persistent cold temperatures
    • While February temperature forecasts warmed by roughly 0.5°F overnight, the Lower 48 remains around 5°F below the 10-year average HDDs have retreated from peak levels but remain elevated over the next two weeks
  • The EIA will release its weekly natural gas storage report today, with the Bloomberg survey indicating a median expectation of a 238 Bcf withdrawal
    • Next week’s report is expected to show a significantly larger withdrawal exceeding 300 Bcf

US LNG feedgas demand remains pressured (S&P)

  • Feedgas demand rose to 19.2 Bcf/d this morning, up from 18.6 Bcf/d yesterday
  • Georgia’s Elba Island LNG terminal and the Cove Point facility in Maryland redirected gas to the domestic market as prices surged and production slowed

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