May 5, 2020

May 5, 2020
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  • WTI is up $2.92 to $23.31/Bbl, and Brent is up $2.69 to $29.89/Bbl
  • Oil prices are headed for the longest run of daily gains in more than nine months as production cuts may be easing weekly storage builds (Bloomberg)
    • WTI surged nearly 15% Tuesday morning after Genscape reported an increase in inventories of only 1.8 MMBbl at Cushing, Oklahoma
    • That would be the smallest weekly gain in nearly two months if confirmed by EIA government data on Wednesday
  • Mandated oil quotas in Texas are “Dead,” said Ryan Sitton of the Texas Railroad Commission
    • Sitton announced the end to process and said the three-member agency wasn’t prepared to vote on “pro-rationing”
    •  The debate over production caps in Texas may be finished, but other states are still considered whether a response is warranted
  • Regional Crudes:
    • Western Canada Select’s discount to WTI narrowed by $1.20 to -$4.50/Bbl on Monday, the smallest in data going back to May 2008 (Bloomberg)
    • Spot Bakken crude at Clearbrook traded at a $2.50/Bbl premium to WTI at Cushing, the strongest since Mid-2018
    • WTI Midland spot continues to trade at a $3/Bbl premium to Cushing, mostly due to Cushing weakness
  • Natural gas is up 12.1c to $2.114/MMBtu
  • Enbridge’s Texas Eastern pipeline had an unplanned outage due to an explosion at its Owingsville, Kentucky compressor station (PointLogic)
    • North to South capacity will be reduced by 1.4 Bcf/d
    • AEGIS notes this outage will constrain Appalachian exports to the Gulf, as well as potentially have a negative impact on Appalachian basis in the area
  • Midcontinent basis rally presents an excellent hedging opportunity (link)
    • While gas supply is likely to soon decrease, Chicago, a downstream demand market, is keeping a lid on producers’ basis pricing. Recent increases in Midcontinent gas basis present a good chance to hedge
    • AEGIS notes that without a rally in Chicago-area pricing, further basis improvements in the Midcontinent area will be difficult. It is an advantageous time to hedge Midcontinent basis, unless you are convinced that Chicago should soon move higher, raising the invisible ceiling on western Oklahoma prices
  • Sempra will be delaying the Final Investment Decision on its 1.75 Bcf/d Port Arthur LNG project until 2021
    • The company cited the ability to finance the project, the ability to market cargoes, and the ability to lessen construction costs in the future as reasons for the delay
    • Sempra is also in the final commissioning stage for the Cameron LNG facility, full commercial operations should be ready by 3Q2020

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