December 2, 2019

December 2, 2019
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  • WTI is up $1.24 to $56.41/Bbl, and Brent is up $1.11 to $61.56/Bbl
  • Oil prices fell Friday by nearly 5%, the largest one day drop since late September amid thin trading
    • Friday’s price action was likely due to signals from OPEC and its allies that the group is averse to deepening output cuts when they meet Dec. 5-6 in Vienna
    • AEGIS notes how quickly news changes as Saudi Arabia is reported to now want cuts ahead of its IPO
  • OPEC, led by Saudi Arabia, and its allies plan on deepening oil cuts as the kingdom wants to deliver a positive surprise to the market before Saudi Aramco IPO (Reuters)
    • The deal being discussed would add at least 400 MBbl/d to the existing cuts of 1.2 MMBbl/d
    • Sources said the latest OPEC analysis showed a large oversupply and build up in inventories in 1H2020 if no additional cuts were made (Reuters)
      • One source said “They (the Saudis) want to surprise the market,” according to Reuters
  • AEGIS notes that OPEC and its allies meet at the end of the week to discuss oil policy
    • Current cuts of 1.2 MMBbl/d expire in March with many believing the group will at least extend the current cuts until mid-2020
    • Forecasters looking at 2020 expect a market glut for at least the 1H2020 as non-OPEC supply continues to outpace demand growth estimates
    • Here at AEGIS we have been saying that in all but the most bullish scenarios for 2020, OPEC will need to cut production next year in-order to keep the market balanced
  • Natural gas is up 6.4c to $2.345/MMBtu
  • Prompt month gas prices are recovering from a $0.22/MMBtu drop on Friday due to a combination of mild weather forecasts and low liquidity due to the holiday
    • Friday’s price decline was the largest single-day drop for prompt month contracts since December of last year
    • The curve has entered a state of backwardation as the January contract is now prompt, Cal 20 strip prices are hovering around $2.29/MMBtu
  • LNG feed gas demand hit a new record of 7.95 Bcf/d on Thanksgiving largely on the backs of Freeport and Cameron as they look to bring their next trains into full service
    • JKM prompt month prices, the Asian LNG price benchmark, continue to fall to all-time lows of $5.67/MMBtu
    • Asian LNG prices continue to grind lower as spot supply continues to flood the market
  • Russia has launched a massive 1,865-mile-long pipeline from Siberia into Northern China (Reuters)
    • This new pipeline could make China Russia’s second largest natural gas customer by 2025
    • AEGIS notes that this new pipeline could shift trade flows on an international scale, especially for LNG

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