May 13, 2020

May 13, 2020
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  • WTI is down 4c to $25.74/Bbl, and Brent is down 8c to $29.90/Bbl
  • Oil futures are steady this morning following a 6.8% rally on Tuesday
    • The prompt month is near a five-week high as the U.S. debates lockdown exit
    • U.S. Energy Secretary Brouillette told Bloomberg in an interview that there are “now 23 states that are opening up their local economies, that represents roughly 40% of the gasoline demand in the U.S.”
  • The EIA said in its monthly Short-Term Energy Outlook (STEO) that U.S. crude production will continue to decline in 2020 and into next year, hitting its lowest point by March 2021
    • Domestic crude output will fall to 10.7 MMBbl/d in March 2021, down by 2.1 MMBbl/d from the record high set in November 2019, according to the agency
    • Typically, price changes affect oil production after about a six-month lag, the EIA said. But current market conditions “will likely reduce this lag as many producers have already announced plans to reduce capital spending and drilling levels.”
  • EIA weekly data is due at 9:30 AM CST
    • U.S. Crude Inventories:                  +       4,320 MBbls (Avg. Bloomberg surveys)
    • U.S. Gasoline Inventories:             –       2,809 MBbls
    • U.S. Distillate Inventories:             +      3,679 MBbls
    • U.S. Refinery Utilization:               +       0.61% change
  • Natural gas is up 0.2c to $1.722/MMBtu
  • EIA released its monthly STEO report containing sharp natural gas revisions
    • EIA forecasts that Henry Hub natural gas spot prices will average $2.14/MMBtu in 2020 and then increase in 2021, reaching an annual average of $2.89/MMBtu.
    • EIA forecasts dry natural gas production will average 89.8 Bcf/d in 2020, with monthly production falling from an estimated 93.1 Bcf/d in April to 85.4 Bcf/d in December
    • EIA forecasts that U.S. liquefied natural gas exports will average 5.8 Bcf/d in the second quarter of 2020 and 4.8 Bcf/d in the third quarter of 2020 – a result of lower global demand
    • The end-of-season storage number is also forecasted to be 4.155 Tcf, a new record
  • JKM LNG spot prices, the Asian LNG benchmark, have jumped 20%, to $2.40-$2.65/MMBtu, on U.S. cargo cancellations and improving demand (Reuters)
    • However, prompt-month TTF futures, the European gas benchmark, continue their slide to $1.68/MMBtu
    • Given the limited amount of global gas storage in the world, concerns are being raised about whether Qatar, the world’s largest LNG producer, decides to grab additional market share by slashing prices
    • The U.S. is taking the brunt of the LNG market downturn with feedgas hovering at lows, currently around 6.4 Bcf, not seen since October 2019

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