January 23, 2020

January 23, 2020
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  • WTI is down $1.37 to $55.37/Bbl, and Brent is down $1.38 to $61.83/Bbl
  • Oil prices are down again this morning on concerns of the possibility of stunted economic growth due to the spread of a respiratory virus from China
    • The fear is the virus could lower fuel demand if economic growth is affected much like the economic impact of the SARS epidemic in 2003
    • The SARS virus was estimated to have globally cost $30-$100 billion – 1% of GDP in China and 0.5% in Southeast Asia (Hindawai – Journal of Environmental and Public Health)
    • So far, 17 people have been killed and nearly 600 infected as China put on lockdown two cities that were at the epicenter of the new coronavirus outbreak (Reuters)
  • The U.S. Bureau of Land Management (BLM) approved a key permit of TC Energy’s 830 MBbl/d Keystone XL crude pipeline project, allowing construction on federal lands (Argus)
    • The permit is an important hurdle for the long-delayed project that would move crude from Hardisty, Alberta, to Steele City, Nebraska
    • Keystone XL still needs other federal permits including one from the Army Corps of Engineers to alter public works at Ft Peck, Montana
    • As the pipeline works toward advancing the project, democratic presidential candidates Elizabeth Warren and Bernie Sanders have promised to revoke federal permits needed to build the pipeline if they win election in November
  • EIA weekly data is due at 10:00 AM CST
    • U.S. Crude Inventories:                  +        361 MBbls (Bloomberg surveys)
    • U.S. Gasoline Inventories:             +     2,978 MBbls
    • U.S. Distillate Inventories:             +     2,179 MBbls
    • U.S. Refinery Utilization:               –      0.47% change
  • Natural gas is up 5.4c to $1.959/MMBtu
  • Gas prices are up to $1.96/MMBtu as the European forecasting model adds two cold days, or 4 Heating Degree Days (HDD), to the end of the 11-to-15-day outlook (Commodity Weather Group)
    • While this is a positive, the weather is still expected to be warmer-than-normal
    • There is also a 23-HDD spread between the warmest and coldest forecasts for the end of the two-week outlook, suggesting that forecasts run the risk of running warmer or colder than expected
  • U.S. gas production continues to trend downwards towards 93 Bcf/d, which would be a three-month low (IHS)
    • The declines are significant when considering production reached an all-time high of nearly 97 Bcf/d at the end of November
  • Kinder Morgan reported, during their earnings call, that they have almost acquired 100% of the right-of-way for their 2.0 Bcf/d Permian Highway Pipeline and are still targeting an early 2021 in-service date
    • The proposed 2 Bcf/d Permian Pass pipeline was described as a work in progress, as it appears the pipeline is not as in demand as previously thought last year
    • Kinder Morgan also plans to expand its intrastate capacity in Texas to handle the expected increase in incremental gas volumes

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