May 22, 2020

May 22, 2020
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  • WTI is down $1.20 to $32.72/Bbl, and Brent is down $1.17 to $34.89/Bbl
  • Oil prices are down from more than two-month highs this morning on Chinese economic concerns
    • Brent futures were down nearly 4%. Renewed tensions between the U.S. and China have surfaced following concerns over a new Hong Kong security law (Bloomberg)
    • Research from China National Petroleum Corp. said fuel demand in the country will drop by 5% this year. A warning sign that any recovery could be long and slow
  • Some indicators of resurgent demand are showing up in China’s teapot refineries
    • Run rates at these independent refineries climbed to a record at 76.12% in the week ended May 22, according to data from industry researcher SCI99
  • Shut-ins have peaked and some wells will start to be reversed as we head into June, according to consultancy Primary Vision (PV)
    • Minimum volume commitments, leasehold obligations and need for cash flow will push operators to bring back wells online, according to PV’s May 22 report
    • Shut-ins lasting 30-45 days are fairly common and show no lasting damage, but as the length is extended the long-term impact becomes more uncertain
  • Natural gas is down 0.4c to $1.706/MMBtu
  • On Thursday, the EIA announced an injection of 81 Bcf for the week ending May 15, 2020
    • This injection was smaller than the 103-Bcf build reported a week earlier
    • Storage now stands 45%, or 779 Bcf, above last year’s levels of 1.724 Tcf
  • Prompt-month Dominion South basis has rallied back $0.14/MMBtu since the TETCO pipeline explosion sent basis prices $0.20/MMBtu lower
    • MichCon basis has given up some minor gains as the force majeure at ANR’s storage facility may be impacting prices
    • Midcontinent-area basis continues to remain at strong levels, presenting a favorable opportunity to layer in some protection

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