July 7, 2020

July 7, 2020
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  • WTI is down 24c to $40.39/Bbl, and Brent is down 15c to $42.95/Bbl
  • West Texas Intermediate remains above $40/Bbl despite concerns that sixteen U.S. states have reported increases in new COVID-19 cases in July (Reuters)
    • California and Texas are reporting high infection rates as a percentage of tests and Florida is re-introducing some limits on economic reopenings
    • The continuous surge in coronavirus cases may limit a rebound in U.S. fuel demand
  • The Bakken’s spread to WTI weakened from -$1.15 to -$2.75/Bbl (Clearbrook) on Monday, the weakest settlement since April 27, after a court ordered the closing of the Dakota Access Pipeline (DAPL)
    • The court ruling weakened Bakken prices but sent other North American crude grades higher
    • Imminent shutdown of DAPL would mean less sweet crude supply, which the pipe transports
    • The pipe has the capacity to transport 570 MBbl/d of oil from the Bakken production area in North Dakota to Patoka, Ill.
    • DAPL must shut down by Aug. 5, a district court ruled Monday. The decision, which shuts the pipe during a court-ordered environmental review that’s expected to extend into 2021, is a win for American Indian tribes that have opposed the Energy Transfer LP project for years (Bloomberg)
    • A map of DAPL can be found here
  • Natural gas is up 6.8c to $1.898/MMBtu
  • The Oct20-Jan21 spread has tightened nearly $0.20/MMBtu over the last two days
    • The primary driver of this spread tightening has been the significant rally in summer month prices as the duration of record heat, in July, remains intact
    • The August natural gas futures contract has rallied from a low of $1.51/MMBtu to nearly $1.90/MMBtu over the span of two and a half weeks
  • The CFTC reported that managed money long positions have increased by 6,496 contracts to total 257,870 last week
    • Managed money short positions fell by 17,749 contracts to total 263,977
    • Outright net positioning is nearly even, but could tilt more bullish with the recent rally in summer natural gas prices

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