January 14, 2020

January 14, 2020
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  • WTI is up 50c to $58.58/Bbl, and Brent is up 71c to $64.91/Bbl
  • WTI oil prices for the front month contract traded at a discount this week for the first time since November
    • The new contango (nearby contract months are less expensive than later months) for the first two months of futures is a reversal from the steep backwardation (downward sloping curve) observed recently
    • Easing tension in the Middle East brought WTI down to the lowest level in six weeks
  • New IMO low sulfur rules are having a big effect on the prices shippers pay for the fuel they use (Bloomberg)
    • Regulations began at the beginning of this year that forces shipping vessels to sharply reduce emissions of sulfur oxides from burning bunker fuel
    • Costs of the new fuel has skyrocketed and now the IMO compliant marine fuel has become more expensive than diesel and gasoline in Singapore, Asia’s oil-trading hub
    • Fuel is the maritime industry’s biggest expense and rising fuel prices adds to the cost of transporting goods and raw materials – potentially harming global supply chains
  • Natural gas is up 4.3c to $2.225/MMBtu
  • The Valley Crossing Pipeline, which feeds into the Sur de Texas pipeline, will undergo scheduled maintenance from January 16 to January 22
    • Flows on the pipeline hit a high of 1.1 Bcf last week, but will likely be reduced to just north of 0.1 Bcf over the next seven days
    • The basis impact may be most felt in the cash market due to the short-term disruption in flows
  • Both the Global Forecast and European weather models are now in agreeance that the end of January will be characterized by colder-than-normal temperatures
    • Risk remains around the intensity of this incoming cold front as forecasting models disappointed during a similar winter emergence last year
    • Overall, gas prices are higher prior to the market open as the overnight weather models added four Heating Degree Days

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