February 28, 2020

February 28, 2020
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  • WTI is down $1.61 to $45.48/Bbl, and Brent is down $1.16 to $51.02/Bbl
  • World markets crashed again on Thursday, further escalating their already worst week since the 2008 financial crisis
    • The Dow Jones dropped over 1,193 points, its worst single point drop ever
    • WTI crude oil continued its fall, declining almost $2/Bbl to $47.09 on Thursday
      • WTI is heading for the biggest weekly lost since 2011
  • China’s inventories of various commodities have swelled, threatening markets already hurt by the virus (Bloomberg)
    • Industry within China continues to produce products like diesel, gasoline, copper and steel albeit at lower rates
    • The concern is that the products are not being used quick enough, therefore, commodities are piling up outside plants, in warehouses and storage tanks
    • Gasoline and diesel stocks are expected to get close to their theoretical capacity this month
  • OPEC+ are headed to Vienna on March 5-6
    • Saudi Arabia is now pushing for collective OPEC+ production cuts of an additional 1 MMBbl/d, wear they would bear the brunt of the cuts, according to the Financial Times (Bloomberg)
    • Russia is still the wild card. The largest OPEC ally is more resilient to lower oil prices
  • Natural gas is down 3.5c to $1.717/MMBtu
  • AEGIS is moving its focus to a more protective approach, from an opportunistic approach, for clients needing to hedge
    • If you have a specific price point on the low end, which is of particular importance from a financing or return perspective, we recommend looking at protecting those levels through the summer
    • We certainly do not advise locking in a long-term loss on hedges but recognize the importance of smoothing cashflow, especially here in the short term
    • Ultimately, there remains some near-term downside risk for both oil and gas markets
  • Given recent HDD losses, the Commodity Weather Group currently forecasts this March will be the seventh warmest on record with 562 HDDs total
    • This is in comparison to the 10-year average of 593 HDDs and the 30-year average of 630 HDDs
    • Temperature forecasts lost 38 HDDs throughout the two-week outlook this week, the equivalent of 76 Bcf of demand loss
  • US natural gas in storage fell by -143 Bcf, this was far below the -158 Bcf analysts expected
    • Stocks loosened to the five-year average and are now 179 Bcf higher
    • Total storage stands at 2.2 Tcf, a surplus of 637 Bcf compared to last year

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