February 7, 2020

February 7, 2020
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  • WTI is down 67c to $50.28/Bbl, and Brent is down 60c to $54.33/Bbl
  • Moscow supports the effort for OPEC+ to take further supply cut action, according to Russian foreign Minister Sergei Lavrov
    • OPEC’s technical committee drafted a proposal earlier this week for an additional 600 MBbl/d cut
    • The subcommittee also recommended that the current 2.1 MMBbl/d cut already in place be extended until the end of the year, rather than March
  • Brent’s prompt month contract spread fell deeper into contango, settling at the weakest since December 2018 on Thursday (Bloomberg)
    • The prompt spread between Brent and WTI is at $4.04/Bbl, the tightest level since early September
  • China will reduce import tariffs on hundreds of U.S. products, including crude, as part of the phase-one trade deal (Argus)
    • The cuts will apply to about $74 billion worth of tariffs that were imposed on September 1 of 2019, according to China’s finance ministry
    • The LNG tariff will still remain
  • Natural gas is down 0.4c to $1.858/MMBtu
  • JKM spot prices, the Asian LNG price benchmark, have fallen below the $3.000/MMBtu barrier to $2.95/MMBtu this Friday (Bloomberg)
    • JKM April futures are also now trading at a discount to TTF prices in Europe, the Dutch natural gas benchmark
    • This means suppliers would prefer to send their cargoes to Europe first, despite European gas prices sitting at decade lows and storage levels being 70% full
    • India may be the lone bright spot in this market as the country has reportedly purchased 26 spot cargoes for the months of January through March, according to Tellurian
  • The city of Kyle, Texas is joining Hays county and the city of Austin, Texas in petitioning for an independent environmental impact study on the Permian Highway Pipeline
    • A president at Kinder Morgan, the developer of the pipeline, has indicated that they are ready to begin construction, but are waiting on final permits
    • An ongoing legal battle has the potential to continue to delay this pipeline past the revised in-service date in 1Q2021
  • The EIA reported a withdrawal of -137 Bcf for the week ending January 31, this exceeded the most bullish analyst estimate of -136
    • Despite the bullish withdrawal, price action remained flat following the report suggesting winter’s influence is already priced in as a non-factor
    • Total stocks are at a surplus of 199 Bcf compared to the five-year average now

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