February 10, 2020

February 10, 2020
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  • WTI is down 24c to $50.08/Bbl, and Brent is down 37c to $54.10/Bbl
  • The coronavirus continues to hit demand in China, leading to a large cut in crude oil runs by PetroChina, China’s second-biggest state refiner
    • PetroChina plans to reduce its crude runs by 320 Mbbl/d this month as the virus hits fuel demand (Reuters)
    • The February cut is about 10% of the refiner’s average throughput rate of 3.32 MMBbl/d
    • Other refineries have made similar cuts in China. Sinopec Corp, Asia’s largest refiner, cut throughput this month by 600 MBbl/d, company officials told Reuters last week
  • Libya’s oil production outage is now in its fourth week. The war-torn nation has seen its oil production fall by nearly 1 MMBbl/d since the nation’s eastern commander Khalifa Haftar forced ports to close in mid-January
    • UN-backed talks are being held in Cairo as a means to end the conflict between the Western and Eastern government factions (Bloomberg)
    • The possible resumption of nearly 1 MMBbl/d re-entering the global market will likely weigh on OPEC+’s calculus on whether to further cut oil supply at their next official meeting
  • Speculators again decreased their net-long positions in WTI last week as demand loss concerns continue
    • Hedge funds reduced their net-long exposure by about 45k contracts to total 131,406
    • Outright short positions jumped sharply, rising 32k contract to 108,207 total shorts
    • Longs were decreased by 13k contacts to total 239,613
  • Natural gas is down 7.6c to $1.782/MMBtu
  • Weather models predict a warm end to the month of February with forecasts currently signaling a total HDD count at or below 700
    • The 10-year total HDD average for February is 790; the 30-year average for the month is 797
    • A total HDD count below 700, for February, would put this month in range to become one of the top-10 warmest of all time
  • The CFTC reported that managed money short positions grew to 505,108 total contracts, up from 489,445 total contracts last week
    • Managed money long positions fell from 194,062 contracts to 189,892 total contracts
    • Peak managed money short positions in 2008 and 2015 came in around ~400,000 contracts, for perspective
  • Australian LNG exports face the most risk from China’s force majeure, due to the coronavirus outbreak, as China accounted for 36% of all LNG purchases from Australia in January (Platts)
    • According to Bloomberg, some LNG cargoes are being redirected away China while other tankers remain docked at ports
    • AEGIS notes that LNG marketers could respond to price and trade incentives by either curtailing shipments, holding LNG in “floating storage,” or challenging force majeures which would all be bearish or neutral for U.S. prices

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