March 30, 2020

March 30, 2020
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  • WTI is down $1.37 to $20.14/Bbl, and Brent is down $2.10 to $22.83/Bbl
  • Oil prices fell over 5% on Monday as coronavirus induced lock-downs continue to depress economies across the world
    • WTI briefly dipped below $20/Bbl, on fears that the global shutdown could last months with demand for fuel declining further
  • Pipeline operators have begun asking oil producers to pull back their output (Bloomberg)
    • Plains All American Pipeline sent a letter last week asking its suppliers to scale back production
    • The Texas Railroad Commission’s Ryan Sitton said in a Saturday tweet that some oil companies are getting letters from shippers (pipelines) asking for production cuts because the are out of storage
    • AEGIS notes that as storage fills up and infrastructure is strained, inland crude grades are most at risk
  • Oil-directed rigs fell the most since 2015 last week, according to Baker Hughes
    • Companies idled 40 rigs, twice the pace of last week’s reduction
    • More than half the shutdowns occurred in the Permian Basin of West Texas and New Mexico
    • Halliburton, the No. 3 overall service provider, is planning for almost two thirds of all rigs in North America to shut down by the fourth quarter (Bloomberg)
  • Natural gas is down 4.5c to $1.626/MMBtu
  • JKM prices, the Asian LNG benchmark, have fallen to their lowest level on record at $2.62/MMBtu
    • Part of the reason for the slump can be attributed to three Indian importers declaring force majeure on prompt shipments, a declaration Italy and Spain are also considering
    • Europe is expected to import 11 million metric tons in March, a 14% increase from the previous record set in December according to HIS
    • Given already high storage levels following this warm winter, continued LNG deliveries into Europe will further pressure already historically low natural gas prices
  • LNG Limited’s financing, to keep the Magnolia LNG terminal afloat, fell through due to current market conditions
    • The proposed terminal would add a little over 1 Bcf/d of additional LNG export capacity upon completion; however, no long-term offtake contracts have been reached
    • A takeover offer for $75MM is on the table but will not be finalized until May 28th at the earliest
    • If no financing is reached before then, the project faces the possibility of liquidation which would trigger contract clauses to terminate project’s engineering, site lease, and construction contracts
  • The CFTC reported managed money short positions fell 42,957 contracts to total 221,495 contracts, this is the lowest short concentration since September
    • Managed money long positions rose by 281 contracts to total 135,899 contracts

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