January 17, 2020

January 17, 2020
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  • WTI is up 30c to $58.82/Bbl, and Brent is up 35c to $64.97/Bbl
  • Oil is hovering just under $60/Bbl as signs of plentiful supply offset the “Phase 1” trade deal agreement
    • The trade deal supports a revival in global manufacturing, thereby stronger oil demand growth (Bloomberg)
    • A positive outcome on the trade war front is yet to be enough to counter what many agencies see as a supply glut in at least the first half of 2020
  • The U.S. Senate approved the US-Mexico-Canada free trade agreement (USMCA)
    • President Trump is expected to sign the legislation shortly, according to the White House
    • The USMCA is not expected to have much effect on for the North American energy sector
    • Canada still needs to ratify the deal
  • Western Canada Select’s (WCS) discount to WTI widened just over a dime to -$24.65/Bbl on Thursday, the weakest since late November 2018
    • On Wednesday, Bloomberg reported that an arctic blast hitting Western Canada is weighing on the price of heavy crude
    • Temperatures in -22 F° and below was cold enough to render heavy crude rock solid
    • To transport, producers must blend in more product like condensate or C5, therefore reducing how much WCS can be shipped to market
  • Natural gas is down 4.8c to $2.029/MMBtu
  • Prompt-month gas prices stand at $2.03/MMBtu as overnight weather models subtracted 35 Heating Degree Days (HDD) overnight
    • This massive degree day loss follows up Tuesday’s 30-HDD loss, which, at the time, was the largest 24-hour demand loss of the winter
    • European weather models currently have a 155-HDD range between their warmest and coldest forecasts
    • The February contract is nearing its lowest close since 2016
  • Global LNG markets could be under pressure as Japan and South Korea shift towards restarting idled nuclear power plants in an effort to claim some semblance of energy independence (Bloomberg)
    • China’s demand prospects are also being revised lower from both residential and industrial sectors as the economy continues to lag
    • Global supply is set to increase significantly from the U.S., Australia, and Qatar which could further saturate an already oversupplied Asian market
    • JKM spot prices, the Asia benchmark, could see prices drop as low as $3/MMBtu as significant supply outpaces weak demand abroad
    • Low international prices pressure current LNG infrastructure projects that are still pre-FID
  • Both Freeport and Kinder Morgan’s Elba LNG facility had their second trains cleared for service
    • LNG feedgas demand fell to 6.6 Bcf as IHS noted reductions from Cove Point, Freeport, and Sabine

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