December 20, 2019

December 20, 2019
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  • WTI is down 20c to $60.98/Bbl, and Brent is down 17c to $66.37/Bbl
  • Oil is set for a third weekly increase on the backs of a U.S.-China phase-one deal
    • WTI futures settled at the highest level in more than three months on Thursday
    • The signing of the phase-one deal is expected in January
  • WTI 2nd-month implied volatility fell to 23.1 on Thursday, the lowest level since late April (Bloomberg)
    • For reference, 2nd-month vol hit a 2019 high of 46.56 in September after oil infrastructure in Saudi Arabia was attacked
    • AEGIS notes that lower implied volatility reduces option premiums and can make structures like costless collars tighter, that is, the strike distance between the put and call is compressed
  • If you missed our market fundamental webcast yesterday, you can view the recording here
  • Natural gas is up 5.1c to $2.324/MMBtu
  • The EIA reported a withdrawal of -107 Bcf for the week ending December 13, this was 25 Bcf less than the -132 Bcf withdrawal in the corresponding week last year
    • Analysts only expected a withdrawal of -93 Bcf, marking the biggest survey miss since April
    • Despite the larger-than-expected withdrawal, prompt-month gas prices fell following the storage announcement
    • This suggests that the market remains focused on the threat of above-average temperatures moving in over the 6-to-10 and 11-to-15-day outlooks
  • European imports of LNG have reached a record high of 12.7 Bcf/d according to the EIA
    • One of the drivers of this demand growth has been the continued price erosion of the JKM benchmark, which has been under pressure from mild weather and ample storage volumes
    • The growth in European imports could continue in the near term as the United States continues to bring on additional LNG trains through 3Q2020 and saturates Asian markets, thus forcing spot cargos to be redirected to Europe

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