December 10, 2020

December 10, 2020
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  • WTI is up 52c to $46.04/Bbl, and Brent is up 57c to $49.43/Bbl
  • WTI is trading slightly higher this morning, clawing back yesterdays’ losses and then some
    • China refineries are helping to balance the physical market, buying up many cargoes for delivery in 1Q2021
    • The EIA’s reported 15 MMBbl increase in crude stocks took the market by surprise. Still, oil prices remained undeterred despite the bearish numbers
  • China’s private refiners’ early buying helps prop up the physical crude markets (Bloomberg)
    • Luqing Petroleum has bought about 6 MMBbl for delivery from January to March. Additionally, China’s “teapot” refineries have also been active in the physical market and are seeking cargoes
    • Usually, Chinese companies do not purchase crude until all middle-east OSP’s have been released; however, the increased competition has buyers scrambling to ensure they can secure the cargoes needed
  • The market received bearish signals from the EIA’s weekly crude stats report, as U.S. stocks increased by the most since April
    • The EIA reported a build of 15 MMBbl for the week ending December 4. This was in contrast with the average estimate of an 849 MBbl draw as reported by Bloomberg
    • Crude inventories for the U.S. are now at a surplus of 56.13 MMBbl to last year and a surplus of 47.7 MMBbl to the five-year average
    • Upon further examination, the figures show net imports rose by 2.6 MMBbl/d during the week ending December 4, 2020. This equates to roughly 18 MMBbl in the market, which helps explain the large build reported by the EIA. Imports rose by 1 MMBbl/d during the week, while exports decreased by 1.6 MMBbl/d
    • The large change in net imports comes as a surprise, as U.S. refineries are struggling, and storage levels are already inflated. U.S. Gulf Coast crude stocks rose by a record 11.8 MMBbl, the most ever recorded
  • Natural gas is up 0.9c to $2.451/MMBtu
  • Asian spot LNG prices ascended above $9/MMBtu, the highest level in the last two years as prompt demand from India coincides with supply outages (Tellurian)
    • Buyers in Asia (particularly India) continue to soak up LNG cargoes amid supply constraints, and Europe could be scrambling for LNG as winter nears
    • The spot Asian LNG price premium over TTF is the highest since June-2018, and given a tight vessel market, prompt LNG cargoes could be hard to attract this winter
  • Weather model changes in the past 24-hours showed a cooler Midwest to East Coast for the 6-10 window and a warmer southern tier in the 11-14 day timeframe
    • The changes amounted to an increase of 2.4 HDDs or ~4.8 Bcf, according to Commodity Weather Group (CWG)
    • While the changes were cooler nationwide, daily weather maps for the next two weeks are still above-average
    • December is close to edging into the top ten warmest, much like last year did at sub ~770 heating degree days (HDDs) (CWG)
    • For reference, the coldest December since 1950 was 1989 at 1103 HDDs and the warmest was 2015 at 632 HDDs
      • In the peak of winter, 1 HDD is approximately 1.7-2 Bcf of demand

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