January 15, 2020

January 15, 2020
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  • WTI is down 14c to $58.09/Bbl, and Brent is down 20c to $64.29/Bbl
  • Oil is trading near six-week lows and hovering just above the 200-day moving average as industry data showed an in increase in U.S. stockpiles
    • The American Petroleum Institute showed a weekly build of 1.1 MMBbl on Tuesday for the week ending January 10
    • Major energy agency’s like the EIA have been forecasting over-supply in at least first half of the year
      • This projected imbalance between supply and demand is weighing on crude oil prices
  • A Permian Basin oil production slowdown won’t be a severe or swift as some shale executives are forecasting, according to BloombergNEF
    • A sample of seven large independent Permian heavy drillers are targeting 12% production growth for 2020, based on the median for the group (Bloomberg)
    • The Permian as a whole expanded by 17% as a whole in 2019
    • The projected growth comes as Permian rigs are down to 397 active rigs, down from 488 a year ago (Baker Hughes)
  • EIA weekly data is due at 9:30 AM CST
    • U.S. Crude Inventories:                  +        384 MBbls (Bloomberg surveys)
    • U.S. Gasoline Inventories:             +     3,389 MBbls
    • U.S. Distillate Inventories:             +     2,023 MBbls
    • U.S. Refinery Utilization:               –      0.26% change
  • Natural gas is down 5.7c to $2.130/MMBtu
  • Prompt-month gas prices took a major hit as European weather models subtracted 20 Heating Degree Days yesterday and another 10 Heating Degree Days overnight
    • This was the biggest 24-hour degree day change of the winter so far
    • The biggest shift came in the 9-to-13-day outlook, i.e. the transition period, from last late last week’s forecasts, where the 6-to-10-day outlook was expected to flip considerably colder by the 11-to-15-day outlook
    • One Heating Degree Day is roughly equivalent to 1.8 Bcf of demand
    • Gas prices are down 5.3% from yesterday’s intraday peak of $2.25/MMBtu
  • The EIA expects gas prices to average around $2.33/MMBtu in 2020 before rising to average $2.57/MMBtu in 2021
    • Production is forecasted to increase to 94.7 Bcf/d in 2020, but decline slightly to 94.1 Bcf/d in 2021
    • Should 2021 projections come to fruition, that would mark the first production decline since 2016
    • The EIA noted that they expect the Appalachia region to drive their production forecasts citing growth through 2020, but declining production in 2021

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