January 7, 2021

January 7, 2021
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  • WTI eclipsed the major psychological level of $50/Bbl yesterday and has continued to rise through this morning
    • The rally has boded well for U.S. basis differentials, with the prompt-month contract for Mid-Cush and MEH increasing by 25c to $1.50/Bbl, and $2.10/Bbl, respectively. Both basis differentials are trading at their highest levels since May
  • Saudi Arabia hikes crude prices bound for the U.S. and Asian markets
    • Saudi Aramco raised its flagship Arab Light grade to a $1/Bbl premium above the company benchmark for exports to Asia, its largest market. The $1/Bbl premium is the highest mark reached since last August
    • All U.S. bound grade prices were lifted by 20c. The increase comes after the EIA reported Saudi exports to the U.S. reached zero for the first time in 35 years last week
  • Oil market prepares for massive $9-Billion index buying spree (Bloomberg)
    • As a result of the collapse in crude prices, the value of the futures contracts in the BSM and GSCI indices have dropped substantially. As a result of the re-balancing, the major indices are looking to purchase another 80 – 100 MMBbl of crude future contracts
    • AEGIS notes that the re-balancing could drive prices higher over the next few days as the market increases its financial length. Still, estimates vary as to the size of the buying spree as JPM published a lower estimate of only $3 billion in crude purchases
  • Natural gas prices have held gains from earlier in the week to trade near $2.70/MMBtu, as weather has strengthened the short-term demand outlook
    • The rally extended beyond the prompt-month contract, with March ‘21 gaining 11c to trade near $2.67/MMBtu. The Summer ’21 strip has gained 28c since December 28, 2020, to trade near $2.78/MMBtu
  • The US Army Corps of Engineers completes a nationwide permit program, but Biden could revoke
    • The new program streamlines federal authorizations for pipelines that move through water crossings, which has been at the forefront of legal challenges for pipelines, but the rule will not go into effect for at least 60 days, leaving an opportunity to be challenged by an incoming Biden administration
    • The US Army Corps of Engineers announced it has reissued 12 new nationwide permits (NWP) and issued four new permits for work in wetlands and other water regulated under Section 404 of the Clean Water Act (PointLogic)
  • JKM continues its hot streak as cold weather blasts east Asia; JKM prices rise to an all-time high of $20.705
    • JKM prices reached a record high of $20.705, the highest since Platts began assessing the price in 2009, completing a full turnaround since prices hit an all-time low at the onset of the Pandemic in April
    • Trafigura topped yesterday’s record high JKM bid with a bid of $26.15/MMBtu for an LNG cargo due in early-February, $4.50 higher than the record bid yesterday that Trafigura was on the opposite end of, as it becomes more and more difficult to purchase cargoes (Bloomberg)
    • Cold weather in the region continues to cause rabid demand for buyers as Beijing recorded it’s lowest temperature in over five decades at -3°F
    • In Japan, several of the nation’s power utilities have asked companies with private generation capabilities to provide them with extra electricity in order to avoid a shortfall. Japanese LNG importers are finding it difficult to find supplies to their gas power plants and have had to reduce generation in some plants (Bloomberg)
  • German regulators plan to shield Nord Stream 2 from U.S. sanctions
    • Mecklenburg-West Pomerania, the German state where the pipeline makes landfall, recently approved plans to legally support the completion of Nord Stream 2 by placing it under the legal umbrella of a foundation, which is well protected under German law (Bloomberg)
    • This marks the most stern attempt to defend the Russian project from the ongoing sanctions from the U.S. as work resumed in German waters last month to complete the final links of the pipeline off the coast of Denmark

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