June 21, 2019

June 21, 2019
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Crude Oil:

  • WTI is up 37c to $57.44/Bbl
  • Oil continues to climb on fears of an Iran/US conflict with Brent now past $65/Bbl
    • More than 20% of the world’s oil output comes from the region
    • Iranian officials told Reuters on Friday that they received a message from President Trump, through Oman, warning that a US attack on Iran was imminent
    • A US military strike against Iran on Thursday night was called off after President Trump approved it
  • Brent and WTI put skew dropped yesterday to the least bearish levels in a month (Bloomberg)
    • Brent 2nd-month 25 delta put skew fell to ~2ppt – the least bearish since May 22
    • Overall oil volatility continues to be elevated with the CBOE/Nymex Oil Volatility Index at ~42.2 on Thursday
  • The Strait of Hormuz had 21 MMBbl/d of petroleum liquids, or 21% of global supply, flow through it in 2018, according to the US EIA
    • Most of it (84%) was crude oil and condensate
    • In addition, an average 11 Bcf/d of LNG traveled through the strait last year

Natural Gas:

  • Natural gas is up 2.7c to $2.212/MMBtu
  • Yesterday, July natural gas prices dropped 9 cents to $2.185/MMBtu after a build of 115 Bcf
    • Expectations were for a build near 104 Bcf
    • Current total storage is now at 2.203 Tcf and has grown quickly this spring
  • July weather is forecasted to be seasonally average or below average across the lower 48
    • The western half of the nation is forecasted to be slightly warmer than normal for the beginning of July
    • However, producing hubs such as Texas, Oklahoma, and Louisiana are forecasted to be uncharacteristically mild during this same time period
  • The Alliance Pipeline, which runs from Canada, through North Dakota, and into northern Illinois, will resume operations after a four-day force majeure delay
    • This should allow for the resumption of 1.6 Bcf/d of Bakken and Canadian gas to flow into the upper Midwest region
    • Alliance transports a mix of natural gas and light NGLs

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