June 3, 2020

June 3, 2020
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  • WTI is down 19c to $36.62/Bbl, and Brent is down 43c to $39.14/Bbl
  • Oil gains were given back after the OPEC+ meeting was put in doubt over cheating by some nations on their output-cuts deal (Bloomberg)
    • Unless all OPEC+ member nations first agree to cut output by as much as they promised, the group won’t hold an early meeting on June 4. Next week’s scheduled meeting was also threatened
    • The market had priced in an extension of one to three months of the current OPEC+ deal, now this extension may not happen
  • New Mexico, North Dakota and other oil producing states are seeking federal funds to plug and remediate hundreds of new “orphan” wells owned by companies that have gone out of business since oil prices plummeted earlier this year (Argus)
    • The U.S. had more than 56,000 orphan wells before virus-induced lockdowns caused oil prices to crash
    • Some states are now expecting many more newly orphaned wells, leaving states to deal with how to pay for plugging and reclaiming the drilling sites
    • North Dakota’s director of mineral resources said ND had no orphan wells two-months ago, but now has 366
    • New Mexico now has 708 known orphan wells. These wells in NM cost an average of $35k to plug, with another $30-80k to remediate the drilling site
  • EIA weekly data is due at 9:30 AM CST
    • U.S. Crude Inventories:                  +       3,326 MBbls (Avg. Bloomberg surveys)
    • U.S. Gasoline Inventories:             –          238 MBbls
    • U.S. Distillate Inventories:             +      3,198 MBbls
    • U.S. Refinery Utilization:               +       0.80% change
  • Natural gas is up 5.5c to $1.832/MMBtu
  • European gas storage levels are currently estimated to be 73% full, a seasonal record according to Bloomberg
    • As Europe nears storage capacity, more U.S. LNG cargoes may need to be cancelled in order to balance out global markets
    • TTF prices, the European gas benchmark, have rallied +$0.40/MMBtu since last week after they neared $1.00/MMBtu
    • JKM prices, the Asian LNG benchmark, have been hovering around $2.00/MMBtu
  • EOG Resources expects to ramp up production in 2H20
    • The company stated on a RBC conference call, that they will be going into the second half of the year expecting a strong price recovery, allowing them to accelerate their production
    • EOG Resources VP of E&P stated, “We plan on third and fourth quarter just continuing to not only bring on those wells that we had curtailed or shut in, but to bring on wells that we have completed and not turned on yet.”
  • Tropical Storm Cristobal is currently projected to hit Louisiana and East Texas by Monday at the latest
    • While the tropical storm could impact a small amount of supply in the Gulf of Mexico, any effects are likely to be felt more on the demand side
    • Previous tropical storm demand impacts have ranged from refinery shutdowns to LNG feedgas curtailments

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