January 28, 2020

January 28, 2020
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  • WTI is up 28c to $53.42/Bbl, and Brent is down 1c to $59.31/Bbl
  • Oil prices take a breather after five-consecutive down sessions, but the China virus continues to spread and the death toll is still rising
    • Production outages in Libya and supportive comments from OPEC have helped lesson a further blow to prices
    • Jet fuel prices in Asia have dropped and profits made by refiners for the product have slumped to the lowest level in more than 2-1/2 years (Reuters)
    • In a note to clients, Barclays said “If air passenger traffic in China declined by half in the first quarter of 2020, it would likely lead to a 300 MBbl/d year-on-year decline in jet-kerosene demand from China”
    • AEGIS notes that the fear of lower demand for product comes amid a backdrop of ample supply
  • Libya’s oil production could be only days from coming to a complete halt, the nation’s top oil official said (Bloomberg)
    • The OPEC nation is currently pumping 262 MBbl/d and could fall as low as 72 MBbl/d in days, NOC Chairman Mustafa Sanalla told Bloomberg
    • Output at 72 MBbl/d would be lowest level since the outing of Muammar Gaddafi
  • Exxon Mobil is planning to accelerate drilling off the coast of Guyana as the prospect holds more oil than previously thought
    • The area known as the Stabroek Block is now believed to hold the equivalent of 8 billion barrels, a 33% increase from the company’s previous estimate (Bloomberg)
    • AEGIS notes that production from Guyana is a component of projected non-OPEC supply growth that is anticipated to outstrip demand this year
  • Natural gas is up 2.7c to $1.929/MMBtu
  • Similar to a few weeks ago, the back half (9-15 day window) of weather models are moderating to normal or colder-than-normal weather conditions
    • Should this colder weather materialize in early February, the market could support gas-prices above the $2.00/MMBtu mark as production appears to be leveling off/slowing and LNG feed gas demand continues to average above 9 Bcf/d
    • The Commodity Weather Group notes that there is still an element of risk to these forecasts as weather runs in the past have quickly reversed
  • Chinese LNG imports are expected to drop 5% year-over-year during January (Bloomberg)
    • This decline follows a four-year run where January imports have increased annually by 33%, on average
    • While China’s drop in demand is an important factor for the global LNG market, it should be noted that roughly 70% of contracts are locked-in under long-term terms

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