February 21, 2020

February 21, 2020
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  • WTI is down 93c to $52.95/Bbl, and Brent is down $1.21 to $58.10/Bbl
  • Oil prices are down almost 2% this morning as market participants continue to weigh the actual demand impact of the coronavirus that is still unclear
    • The virus is still spreading and confirmed cases outside of China continue to rise
    • Also, Russia appears to be in no hurry to further cut supply after its Energy Minister Alexander Novak said on Thursday that it no longer makes sense for OPEC and its allies to meet before the scheduled March gathering
      • Over the past month, there has been talk among OPEC that the meeting needed to be moved up in order to combat demand loss from China
  • US crude inventories rose by 415 MBbl last week versus estimates of almost a 3 MMBbl build
    • Domestic oil production stayed unchanged at 13 MMBbl/d, up 1 MMBbl/d from a year earlier
    • U.S. refiners increased inputs by 190 MBbl/d to 16.2 MMBbl/d
  • WTI Midland’s premium to oil at Cushing hit the highest level since November yesterday
    • The Permian crude added 20c to +$1.20/Bbl
    • AEGIS notes that the large amount of excess pipeline to the Gulf Coast, brought on in the last six months, has helped push the west Texas grade above the benchmark
      • The addition of Catcus 2, EPIC, and now Gray Oak, will provide excess takeaway capacity for the foreseeable future
  • Natural gas is down 3.3c to $1.887/MMBtu
  • The EIA reported a withdrawal of -151 Bcf for the week ending February 14, this was larger than both the median and five-year average withdrawal of -141 Bcf and 135 Bcf, respectively
    • Forecasted withdrawals have tightened significantly to the five-year average and the end-of-season storage number is expected to come in around 1.81 Tcf, according to the ICE swap
    • Total stocks stand at 2.34 Tcf, a 200 Bcf surplus to the five-year average and a 613 Bcf surplus to last year
  • Two LNG cargoes from Cheniere have been turned away from Spanish utility owner Naturgy Energy Group (Bloomberg)
    • Despite TTF, the Dutch gas benchmark, losing more than a fifth of its value from the start of the year it is still not enough to encourage lignite-to-gas switching in Northwest Europe
    • There is further speculation that two Japanese buyers are also considering cancelling cargoes from the U.S. before they load this summer
    • Cheniere provides customers the option to not take delivery on their cargoes if they notify the company 45 to 60 days in advance, while also paying a fee
  • Jordan Cove LNG, which has a capacity of roughly 1 Bcf/d, was ruled a non-decision by FERC
    • The delay came after the state of Oregon denied a key permit the day before FERC’s open meeting
    • The project was expected to become commercially operational in 2025 and could become the first LNG project on the west coast

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