June 19, 2020

June 19, 2020
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  • WTI is up $1.39 to $40.23/Bbl, and Brent is up $1.20 to $42.71/Bbl
  • Oil futures in New York traded above $40/Bbl this morning, up about 11% this week
    • The rally comes as stronger consumption continued to push physical markets higher
    • Gasoline futures in the U.S. moved into backwardation for the first time in three months on Thursday, a bullish signal that supplies are tightening (Bloomberg)
  • A potential resurgence of the virus is hanging over oil’s long-term outlook, despite recent consumption increases
    • Beijing has seen a spike in cases tied to its food markets. This has caused a plunge in road traffic as authorities battle the new outbreak
    • Some U.S. states are still seeing cases surge
  • Continental Resources, a key Bakken oil producer, will ease some of its production curtailments but will cap its output at 50% of pre-Covid-19 output in July, or about 225-250 MBoe/d
    • “As improved supply and demand fundamentals benefit oil prices, we expect to continue restoring production in subsequent months,” chief executive Bill Barry said
  • Natural gas is up 1.1c to $1.649/MMBtu
  • Natural gas production has been slowly creeping higher with production numbers estimated to be around 87.1 Bcf according to Platts, this represents a 0.6 Bcf increase from the start of June
    • AEGIS estimates many companies could be targeting a net Henry Hub price of around $2.75/MMBtu before production starts to significantly ramp up
    • The Cal ’21 strip has improved from a low of $2.25/MMBtu back in March to around $2.64/MMBtu currently; further improvement could be in store as we near the end of 2020
  • The EIA reported a build of 85 Bcf for the week ending June 5, this was slightly larger than the average estimated build of 79 Bcf
    • Current U.S. inventories are now at a surplus of 722 Bcf compared to last year and at a surplus of 419 Bcf compared to the five-year average
    • ICE currently projects the end-of-season storage number to come in around 3.98 Tcf

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