December 13, 2019

December 13, 2019
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  • WTI is up 64c to $59.82/Bbl, and Brent is up 83c to $65.03/Bbl
  • Oil climbed to its highest in nearly three months, teasing $60/Bbl for WTI, on Friday as the US and China agree on a phase-one trade deal
    • Britain’s ruling Conservative Party won a large majority in yesterday’s election, giving it the power to take the country out of the European Union (Reuters)
    • Both the 18-month trade war and uncertainty around Brexit have weighed on demand growth
  • Output at oil and gas wells in the Permian is declining at an accelerating rate, forcing operators to drill more to maintain production levels, according to IHS Markit
    • In 2019, Permian output started the year at 3.8 MMBbl/d, 1 MMBbl/d higher than the year before
    • IHS expects production from those well will drop by about 1.5 MMBbl/d, a base decline of 40%
    • The consultancy group expects total US production growth to rise by 400 MBbl/d in 2020 before flattening in 2021
  • Natural gas is down 5.4c to $2.274/MMBtu
  • The EIA reported a -73 Bcf withdrawal for the week ending December 6, this was -1 Bcf lower than what was expected
    • Despite the official number being within 1 Bcf of expectations, prices fell sharply immediately following the report
    • The selloff in the prompt month contract, following the EIA numbers, was, perhaps, an overreaction and details the amount of bearish pressures currently in the natural gas markets
  • Platts forecasts the JKM LNG Benchmark (Asia) to average around $4.50/MMBtu in 2020 and the Dutch TTF Hub to average $4.15/MMBtu
    • Low overseas gas prices could be a bearish factor for Henry Hub prices as producer reliance on oversea markets to absorb oversupply, via LNG, grows
    • Falling Asian gas prices mean spot cargoes are likely to continue to get pushed onto European markets
    • Coal retirements and winter weather abroad will be the primary determinants in international markets in 2020

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