November 5, 2020

November 5, 2020
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  • WTI is down 8c to $39.07/Bbl, and Brent is down 1c to $41.22/Bbl
  • Oil is trading 0.5% lower this morning as election uncertainty weighs on the markets
    • The EIA reported a surprise draw for the week ending October 30
    • OPEC President hints of possible output hike delay, as leaders of the cartel push for an extension of cuts
  • The market received supportive data reported by the EIA on Wednesday
    • The EIA reported a surprise draw of (-) 7,998 MBbls for the week ending October 30, well below the estimate of a (+) 581 MBbls build
    • Inventories for the US are now at a surplus of 45.576 MMBbls to last year and a surplus of 33.79 MMBbls to the five-year average
  • Biden needs six more electoral votes to hit 270 as the numbers currently stand (Bloomberg)
    • Although Biden is closing in on the 270 electoral votes to win the presidency, incumbent Donald Trump has called for a recount or filed a lawsuit in key battleground states Wisconsin, Michigan, Pennsylvania, and Georgia
    • With the likelihood of a democrat-controlled house dwindling, Biden may be forced to scale back proposals to remove subsidies for oil producers.
  • Russia, Saudi Arabia publicly pressed fellow members into prolonging the current oil supply cuts
    • The group is slated to return 2 MMBbl/d of production starting in January. Algeria was the first country to come out and publicly support the cut extensions
    • The call for cut extensions comes as coronavirus cases continue to mount globally, decimating hopes of a quick oil demand recovery. If more lockdowns are imposed, further demand destruction is all but certain
  • Norway will export 1.64 MMBbl/d next month, a 0.131 MMBbl/d increase from November (Bloomberg)
    • An export number of 1.64 MMBbl/d would be the countries highest since at least 2012
  • Natural gas is up 1.7c to $3.063/MMBtu
  • Natural gas prices have recently retreated from muti-year highs
    • The December contract has lost 30c since Oct. 30 – a multi-year high. Winter 2021-2022 has fallen to $3.12 from its Friday high of $3.41. Cal 2021 as a whole has dropped to just above $3.00 after hitting $3.17 last week
    • A trifecta of events sent prices to multi-year highs last week, but two of those catalysts have faded
      • First, production has screamed higher since last week, rising nearly 5 Bcf/d from October 28 lows of ~85 Bcf. Gulf of Mexico volumes have returned and Appalachia output has surged
      • Demand is down. Residential and commercial demand for gas has dipped with warmer than normal temperatures across the Lower 48. A big swing from the cold front induced demand produced last week
  • U.S. LNG feedgas demand has averaged over 10.2 Bcf/d over the past six days, according to Platts data
    • Strong LNG demand is helping offset record gas production from Appalachia and lower demand from above-average temperatures across the U.S.
  • The EIA is estimated to report a 31 Bcf withdrawal in gas inventories today for the week ending October 30 (Bloomberg analysts estimates)
    • The combination of cold weather and lower production due to freeze-offs and the hurricane, was likely enough to cause the first gas withdrawal for the corresponding week since 2006
    • A 31 Bcf draw would be 66 Bcf lower than 2019 and 69 Bcf lower than the five-year average for the same week

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