February 25, 2021

February 25, 2021
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  • WTI is up 3c to $63.25/Bbl, and Brent is down 1c to $67.04/Bbl
  • Barclays lifts its oil price forecast on muted supply response, improving demand outlook
    • The bank sees Brent and WTI averaging $67/Bbl and $63/Bbl in 4Q2021, respectively
    • Barclays did urge caution as a few downside risks threaten the market in the near term, including easing OPEC+ cuts, rising COVID-19 infections from the new strains, and elevated positioning
  • OPEC+ to consider a 500 MBbl/d output increase at its March 4 meeting
    • The cartel is currently withholding 7.125 MMBbl/d of output, or around 7% of world demand, despite the recent run-up in crude prices
    • Saudi Arabia’s voluntary cuts of 1 MMBbl/d will be up at the end of March, at which point the country will gradually return that supply to the market
    • AEGIS notes, the recent run-up in crude prices has caused several trading houses to upgrade their price forecasts. With nearly 7 MMBbl/d of spare capacity on the sidelines, OPEC is still holding oil prices hostage
  • U.S. crude output dropped by more than 1 MMBbl/d last week for the largest weekly fall ever (EIA)
    • Refinery runs also fell to their lowest level since 2008, as the Texas freeze caused refineries to reduce inputs and shutter processing units
    • Some analysts were estimating that much more supply was knocked offline due to the freeze, however, weekly production figures are largely based on estimates. Monthly data should provide a more reliable figure
  • Cheniere company executives expect a strong LNG market this year with improved price signals, few cargo cancellations, and strong Chinese demand (Cheniere, Platts)
    • Cheniere appears to have received three or four cancellations for the current quarter, based on the revenue it booked from offtakers, according to Platts
    • “Recent volatility in the LNG market and the rapid tightening of the market forward the end of last year and early this year helps reinforce the value to customers of a flexible, visible, long-term supply agreement with Cheniere,” CEO Jack Fusco said during a conference call with investors
    • AEGIS notes that the forward curves for Henry Hub and global benchmarks imply that LNG exports from the U.S. should flow this summer
  • U.S. Permian Basin producers Pioneer Natural Resources and Centennial Resources Development see output fully restored near the end of February, the companies said February 24
    • Last week’s deep freeze and widespread power outages forced production shutdowns for many oil and gas producers in the Permian Basin and elsewhere
    • “The winter storm last week did impact our portfolio of production by approximately 30 MBbl/d,” Pioneer CFO Rich Dealy said
    • AEGIS notes modeled natural gas production for the Lower 48 is now close to back to pre-freeze levels of 90.8 Bcf/d, according to PointLogic
  • The EIA is expected to show a 328 Bcf withdrawal from storage for the week ended February 19 (Bloomberg Estimates)
    • The Bloomberg economist range of estimates is -287 on the high end and -350 for the low estimate
    • The range of estimates is large because of the difficulty in measuring demand during an unprecedented event

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