February 6, 2020

February 6, 2020
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  • WTI is down 7c to $50.68/Bbl, and Brent is down 61c to $54.77/Bbl
  • OPEC+’s technical committee will recommend deeper oil production cuts of 600 MBbl/d in the second quarter, according to a delegate
    • The new cuts will be for three months starting in March to offset damage done to demand caused by the Chinese virus outbreak
    • The broader OPEC+ group has yet to set a date for an early meeting this month
  • A build in crude stocks last week surprised analysts who were expecting a more modest increase
    • Crude stocks rose by 3.4 MBbl/d last week, but oil prices held steady following the EIA data release on Wednesday as gasoline stocks fell
    • Domestic crude production averaged 12.9 MMBbl/d, down by 100 MBbl/d from a record high of 13 MMBbl/d in the previous week
  • Saudi Aramco has cut the price of its crude it sells to Asia
    • The price reduction comes in response to a drop in demand caused by the coronavirus (Bloomberg)
  • Natural gas is down 1.6c to $1.845/MMBtu
  • The Chinese National Offshore Oil Company (CNOOC) will declare force majeure on some LNG contracts as the coronavirus’ impact continues to cut into demand
    • AEGIS notes that this should not materially impact domestic LNG exports, for now, as China has forgone purchases of U.S. LNG cargoes ever since they implemented a 25% tariff on these goods
    • However, China’s declaration could contribute to further downside in JKM spot pricing, which hit a historic low of $3.15/MMBtu on Wednesday, according to Bloomberg
    • Buyers in North Asia are already seeking to purchase spot LNG cargoes below $3/MMBtu for delivery in the months of March and April
  • Analysts estimate a -126 Bcf withdrawal for the week ending January 31, this is 102 Bcf less than the -228 Bcf withdrawal in the corresponding week last year
    • Analyst estimates ranged fairly wide from a draw of -110 Bcf to -136 Bcf
    • A withdrawal within this range would expand the surplus to the five-year average to 210 Bcf
  • Permian gas production has fallen approximately 1.5 Bcf, according to PointLogic estimates, as winter weather conditions hamper day-to-day activity
    • Prompt-month Waha basis remains near a $-2.00/MMBtu discount, Waha spot prices have risen slightly over $1.50/MMBtu

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