June 2, 2020

June 2, 2020
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  • WTI is up 40c to $35.84/Bbl, and Brent is up 61c to $38.93/Bbl
  • Oil prices moved higher Tuesday morning as traders expect a potential extension of record production curbs by OPEC+
    • A decision to extend oil cuts will hinge on the group’s two largest producers, Russia and Saudi Arabia, with Russia expected to make a decision on its OPEC+ position on Tuesday (Bloomberg)
  • Brent crude’s prompt spread flipped into backwardation for the first time since early March, a sign of tightening in near-term supply/demand balances
    • The move to backwardation was ephemeral this morning as the August contract is currently trading a few pennies under September Brent, as of 7:20 AM
    • Today’s flatter curve shape is much different from the steep contango that was in the curve back in April. At its most bearish point, Brent M1-M2 was at $3.97 of contango
  • Natural gas is up 1.9c to $1.793/MMBtu
  • Henry Hub cash prices dropped $0.18/MMBtu yesterday, settling at $1.52
    • The Oct20-Jan21 spread continues to widen, currently at $0.93, inferring a growing steepness in the natural gas curve’s contango heading into 2021
    • Bal ’20 Waha basis has rallied approximately $0.15/MMBtu over the last several days, coming in at -$0.40/MMBtu, while Cal 21 Waha basis has seen a similar $0.10/MMBtu price improvement
  • LNG feedgas demand remains below 4.0 Bcf this morning, representing a more than 5-Bcf drop from March peaks of 9.6 Bcf
    • Given the current forward curves for TTF, JKM, and Henry Hub, LNG exports are unlikely to be economic until October or November
    • A lack of new LNG projects coming online this year further puts pressure on feedgas demand
  • ExxonMobil is seeking to increase the capacity of its 2.0 Bcf/d Golden Pass LNG facility to nearly 2.4 Bcf/d (Reuters)
    • The first of three LNG trains is expected to be available 2024 with the entire export facility completed by 2026

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