November 11, 2020

November 11, 2020
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  • OPEC trims oil demand forecast as countries re-impose lockdowns
    • OPEC researchers said, “The oil demand recovery will be severely hampered, and sluggishness in transportation and industrial fuel demand is assumed to last until mid-2021”, in its latest monthly oil market report
    • The group reduced its 4Q2020 forecast for crude output required by the cartel to 26.51 MMBbl/d – a 960 MBbl/d revision
  • EIA weekly data is due at 9:30 am CST
    • U.S. Crude Inventories: -872 MBbls (Avg. Bloomberg surveys)
    • U.S. Gasoline Inventories: +202 MBbls
    • U.S. Distillate Inventories: – 1,612 MBbls
    • U.S. Refinery Utilization: + 0.59% change
  • Oil refineries continue to close globally as the coronavirus dims prospects of an immediate fuel demand recovery
    • The pandemic reduced global fuel demand by 30% initially, causing refiners to halt operations temporarily. Now that the impact seems to be more long-term, several refiners have announced plans of refinery retirements or retrofitting to produce alternative products
    • United States
      • Marathon Petroleum – Closing 161 MBbl/d Martinez, California refinery and its 26 MBbl/d Gallup, New Mexico refinery
      • Royal Dutch Shell – Closing 240 MBbl/d Convent, Louisiana refinery (largest U.S. refinery closure)
    • Europe
      • Petroineos – Plans to deactivate half of its Grangemouth, Scotland 200 MBbl/d refinery (announced November 10, 2020)
  • Winter natural gas prices have suffered over the past week as mild weather and strong production add more supply to the market
    • The December, January and February contract months are all down by about 45c since reaching multi-year highs
      • Bullet prices as of 11/10: Dec @ $2.949, Jan @ $3.07, Feb @ $3.04
      • Recent high: Dec @ $3.35, Jan @ $3.47 Feb @ $3.42- all within the last three weeks
    • Lower residential and commercial (Res/Comm) demand has trended on the low side of the five-year average so far this month
    • Strong ResComm demand in late October, coupled with lower production due to outages, produced the recent gas contract highs mentioned above
  • The Energy Information Administration (EIA) raised its gas production estimates for 4Q 2020 and 1Q 2021 (EIA STEO)
    • Marketed gas production forecast for 4Q 2020 was raised by 0.51 Bcf/d to 96.99 Bcf/d and 1Q 2021 was increased by 1.06 Bcf/d to 95.1 Bcf/d
    • After reaching an annual average of 100.4 Bcf/d in 2019, production is expected to average 98.51 Bcf/d in 2020 and decline to average 95.63 Bcf/d for 2021, according to the STEO report
    • “EIA expects to see a further 5.2% decline in 2021 as a result of rising natural gas prices reducing demand in the electric power sector”, EIA Administrator Lind Capuano said in a statement

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