February 26, 2021

February 26, 2021
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  • WTI is down 131c to $62.22/Bbl, and Brent is down 96c to $65.92/Bbl
  • Oil prices have weakened this morning as a wider market sell-off takes place
    • The rise in bond yields has been fueled by fiscal stimulus hopes in the U.S. and a post-pandemic economic rebound that could fuel inflation. The rise in bond yields has spread to money markets as well, with investors fleeing riskier assets like stocks
    • The Dollar Index (DXY) started the week in a downward trend reaching a bottom of $89.962 before sharply reversing to climb to $90.559, pressuring oil prices further
  • J.P. Morgan raises crude price forecasts, notes recent rally may be overdone
    • The bank lifted its 2021 Brent price forecast by $3 to $64/Bbl and its 2022 forecast by $6 to $72/Bbl
    • OPEC+ discipline will likely remain strong, and a modest increase in U.S. output of 500 MBbl/d above December 2020 levels adds to the bullish outlook, according to JPM
    • The bank noted that prompt futures seem to be a bit high relative to current fundamentals
  • Iran threatened to end the deal with International Atomic Energy Agency to monitor nuclear activities as the U.S. pressures the country to comply with the accords
    • The IAEA said Iran had denied it access for snap inspections at two sites where it later found uranium particles in June
    • The pressure by Iran will likely impede any talks regarding the easing of sanctions, as the U.S. has remained adamant that they will not be the first to re-join the JCPOA
    • The U.S. carried out airstrikes on Thursday evening, hitting Iran-backed militia groups in Eastern Syria, possible escalating tensions

 

 

  • Natural gas is down 4.2c to $2.735/MMBtu
  • The second-largest U.S. natural gas inventory withdrawal was posted last week, but with cold weather retreating, Henry Hub prices continued to fall
    • Storage declined by 338 Bcf to 1.943 Tcf for the week ended February 19, the EIA reported data on February 25
    • At -338 Bcf, the withdrawal was more than 200 Bcf larger than the five-year average
    • AEGIS’s supply and demand model now expects the gas market to enter injection season (early April) with about 1.45 Tcf in the ground
  • Shell says the global LNG trade will grow by 2.8% in 2021, driven by Asia (Platts)
    • In Shell’s latest annual LNG outlook published February 25, the company sees the LNG trade growing by around 10 million mt in 2021. This is 2.8% growth compared to 2020 and brings total trade to 370 million mt
    • Asian demand in 2021 is expected to drive LNG growth in 2021, according to Shell
    • Outside of China, Shell expects LNG demand mostly flat, with estimates of either limited growth or a slight fall in consumption across Europe, Americas, Africa, and the Middle East
    • “As LNG demand grows, a supply-demand gap is expected to open in the middle of the current decade with less new production coming on stream than previously projected,” Shell said

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