January 9, 2020

January 9, 2020
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  • WTI is down 22c to $59.39/Bbl, and Brent is down 28c to $65.16/Bbl
  • Oil prices are steady this morning after a sharp drop on Wednesday following a de-escalation between the U.S. and Iran
    • The prospect of an open war in the Middle East has backed off for now
    • Price is now lower than right before the U.S. took out Iran’s top general as the multi-dollar geopolitical risk premium has evaporated
    • Wednesday’s price action saw nearly a 10% intraday range, the largest one day range movement in at least the last five years in terms of dollars
  • US crude stocks surprised analysts yesterday after showing a build where the consensus was a material withdrawal
    • Crude inventories rose by 1.2 MMBbl as exports and refinery runs fell sharply for the week ended January 3
    • Large product builds also helped make the data release bearish
    • US gasoline stocks rose by a whopping 9.1 MMBbl, the largest weekly build in four years
    • Distillate fuel stocks increased by 5.3 MMBbl to 139.1 MMBbl
  • President Trump held a press conference on Wednesday morning calling for peace but also promising to levy more sanctions on Iran
    • He opened his presser by saying that Iran will never be able to obtain nuclear weapons
    • Overall rhetoric was called for de-escalation and a path away from further military action
  • Natural gas is down 1.5c to $2.126/MMBtu
  • Analysts estimate a -50 Bcf withdrawal for the week ending January 3, 44 Bcf less than the -94 Bcf withdrawal in the corresponding week last year
    • This would be the smallest January withdrawal since 2009, according to Bloomberg
    • Estimates ranged from -41 Bcf to -63 Bcf
    • A withdrawal within expectations would put total storage at a 100 Bcf surplus to the 5-year average
  • Cheniere has filed a second request to begin early work on its roughly 1.5 Bcf/d Midscale Stage 3 expansion project
    • FID is expected in 2020 with a targeted in-service in mid-2021
    • There is approximately 7.2 Bcf/d of new LNG capacity currently under construction and some 47 Bcf/d of pre-FID projects that have yet to be approved
    • However, as new trains have come online, global LNG markets have faced increased oversupply, resulting in a deterioration of global benchmark prices and creating added pressure for projects working towards FID

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