June 4, 2020

June 4, 2020
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  • WTI is down 56c to $36.73/Bbl, and Brent is down 41c to $39.38/Bbl
  • Saudi Arabia and Russia, the de-facto leaders of the OPEC+ coalition, have lost patience with the errant behavior of the next-biggest member, Iraq, according to people familiar with the matter (Bloomberg)
    • Iraq is cheating on its oil cut quota by about 600 MBbl/d. The next largest offender is Nigeria who is almost 300 MBbl/d over its promised reduction
    • Quota cheating is delaying a decision by OPEC+ who are wanting to extend the historic supply cuts by one to three months
  • Brent and WTI near-term time-spreads weakened amid concerns of OPEC+ infighting and finger pointing
    • The Brent August-September spread fell into deeper contango at -18c/Bbl; was briefly backwardated on Monday
    • AEGIS notes that a flattening curve can be a sign of a recovering supply-demand balance. When the front of the curve is in backwardation it means the physical markets are in need of barrels today
  • U.S. independent Parsley is restarting most of the production it had shut-in in May to enhance cash flow (Argus)
    • Parsley was one of the first to announce a revival in output
    • The company is not planning on any increase in spending, even as output rises. Parsley has cut its 2020 capex budget to less than $700 million, of which $379 was spent in the first quarter. Full-year guidance was $1.63-$1.8 billion
    • CEO Mark Gallagher said “We are not putting new capital to work – our drilling and frac operations remain suspended as we evaluate market fundamentals”
  • Natural gas is down 0.5c to $1.816/MMBtu
  • TTF, the Dutch marker, traded above Henry Hub during yesterday’s trading session for the first time since April
    • The major natural gas benchmarks, TTF, JKM and NBP have rallied by 40c, 10c and 36c, respectively over the past 3 days
    • If prices remain at these levels, this may help support domestic LNG exports after feed gas demand reached its lowest level in over a year
  • Analysts expect a 111-Bcf injection for the week ending May 29 (Platts)
    • This would be below the 118-Bcf injection reported in the corresponding week last year, but above the five-year average of 103 Bcf
    • Analyst injection estimates ranged from a low of 93 Bcf to a high of 122 Bcf
    • A withdrawal within expectations would increase the surplus to the five-year average to 431 Bcf with total stocks at 2.723 Tcf
  • Preparations in anticipation of Tropical Storm Cristobal have begun as companies, such as BP, begin turning off production in the Gulf and evacuating workers
    • The tropical storm could impact LNG loadings and refinery runs, both of which are struggling following the COVID-19 outbreak
    • It is still too early to tell whether this tropical storm will evolve into a full-fledged hurricane by the time it hits land

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