WTI Retreats Below $100/Bbl; Gas Drops as Power Demand Falls

WTI retreats below $100/Bbl

• The WTI front-month contract fell $3.34 to $99.14/Bbl Friday morning (7:30 AM CT)
• Fighting has intensified across the Middle East over the past two weeks, with US strikes targeting Iranian oil tankers
• The UK Maritime Trade Operations received a report that two vessels were struck by unidentified projectiles off the coast of Oman
• Yemen’s Houthis have attacked Saudi energy facilities, forcing operations to halt, while advancing toward coastal areas bordering the Bab el-Mandeb Strait
• • The advance could allow the group to extend its disruptive capabilities toward the narrowest section of the waterway
  • “A resumption of a full-blown Saudi-Houthi war would be a potential catalyst for our high oil price scenario coming to fruition,” Helima Croft of RBC Capital Markets said
• The International Energy Agency lowered its oil demand forecast for this year and warned that consumption could weaken further in the coming months as the Iran war continues
• • The agency now expects global oil demand to decline by 2.5 MMBbl/d this year, marking the largest annual average contraction since the 2020 Covid pandemic
  • The IEA also reduced its global supply outlook by 1.3 MMBbl/d and now projects an annual decline of 5.7 MMBbl/d, while pushing its expected recovery into next year

Gas drops as power demand falls

• Natural gas is down -5.5c to $2.779/MMBtu (As of 07:30 AM CDT)
• Power demand fell back below 50 Bcf/d all the way to 46.8 Bcf/d
• L48 average temperatures are at 76°F today, and are expected to drop consistently over the next two weeks to below 70°F by the end of the forecast period (Criterion)
• • Barring any late September/ early October heat wave, power demand should steadily decline with the temperatures, making any more 50+ Bcf/d days of power demand unlikely for the remainder of the year

The EIA reported a weekly build of 40 Bcf for the week ending 9/4

• This build was above median expectations of 34 Bcf as reported by Bloomberg
• Inventories are currently at a surplus of 148 Bcf to the five-year average, and below average heat in late September could increase this surplus further