January 30, 2020

January 30, 2020
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  • WTI is down $1.23 to $52.10/Bbl, and Brent is down $1.38 to $58.43/Bbl
  • Oil prices are down this morning as the coronavirus continues to spread, causing concerns over the possible economic impact
    •  An overall bearish crude oil stat on Wednesday also contributed to the downward pressure on oil price
    •  U.S. crude inventories rose by 3.5 MMBbl for the week ending January 24, according to the EIA
      • The average analysts estimate was small build of 258 MBbl
  • OPEC members are weighing whether to hold an emergency meeting next month, as oil prices fall on concern the Chinese virus will damage demand (Bloomberg)
    • The group is scheduled to meet in March, but that could be moved up to February, according to Algerian Energy Minister Mohamed Arkab
    • AEGIS notes that it makes sense OPEC would want to stave off a dramatic price slide. OPEC would likely want to protect the hard work done by voluntarily supply cuts
  • A sample of analysts’ estimates for China oil demand destruction due to the virus, as compiled by Bloomberg
    • Sanford Bernstein & Co.
      • Cut its 2020 forecast for Chinese oil demand growth by 71% to 100 MBbl/d, compared with an earlier estimate of 350 MBbl/d
      • Jet fuel and kerosene demand will drop by 130 MBbl/d in the first half of the year, a 20% drop
      • Cut gasoline and diesel consumption by 50 MBbl/d and 40 MBbl/d respectively
      • Oil could fall to around $50/Bbl without OPEC intervention
    • Morgan Stanley
      • If the virus continues to escalate for three to four month, it would cut around 75 MBbl/d from China’s 2020 oil demand growth
      • If peak is in one to two months, 1Q demand growth would fall to 150 MBbl/d from 310 MBbl/d
      • Cancelled flights could cause the loss of 400-700 MBbl/d of jet fuel demand in 1Q, while diesel demand weakness could lead to refinery run cuts
      • The bank kept its oil price forecasts unchanged for now
  • Natural gas is down 3.4c to $1.831/MMBtu
  • The Commodity Weather Group has lowered their February Heating Degree Day forecast from 750 HDDs to 715 HDDs, for the full month
    • This is in comparison to the 30-year February average of 797 HDDs and the 10-year February average of 790
    • All in all, weather runs removed six HDDs from the forecasted two-week outlook overnight sending prompt-month gas prices lower
  • Analysts expect a -207 Bcf withdrawal for the week ending January 24, this would be larger than last year’s withdrawal, for the corresponding week, of -171 Bcf
    • Analyst withdrawal estimates ranged from a low of -180 Bcf to a high of -226 Bcf
    • Should this withdrawal fall within expectations, total stocks would decrease to 2.74 Tcf
  • Kinder Morgan recently announced that they will not be building any new liquefaction facilities, in the near future, due to long-term contracting moving slow and weak international pricing
    • Kinder Morgan gained FERC approval for their 1.4 Bcf/d Gulf LNG project back in July, but a Final Investment Decision is unlikely given current market forces
    • Despite the negative outlook on LNG projects, the company still believes that there is a need for two, large, gas pipeline projects, on top of the ones currently under construction, for the Permian Basin

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