November 6, 2020

November 6, 2020
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  • WTI is down 83c to $37.96/Bbl, and Brent is down 81c to $40.12/Bbl
  • The prompt-month oil contract is trading nearly 2% lower this morning
    • Royal Dutch Shell announces largest U.S. refinery closure thus far
    • China imposes artificial fuel floor to help bolster refining demand
  • Royal Dutch Shell announced that it was closing its Convent, Louisiana refinery
    • The company failed to find a buyer for its 211 MBbl/d refinery. This is the largest U.S. facility and first on the U.S. Gulf Coast to shut-down since the onset of the pandemic
    • The refinery is the ninth to shut-down or be idled since the pandemic has dealt a heavy blow to fuel demand
    • The company announced that it plans to sell all but six refineries and petrochemical plants globally on its quarterly earnings call. Nearly 2 MMBbl/d of refining capacity has been shut-down globally
  • China re-imposes minimum fuel price to protect its refineries from weak global demand
    • The National Development and Reform Commission said that they would fix fuel prices where refineries will maintain an acceptable margin at $40/Bbl crude
    • The measure shielded the countries largest refineries earlier in the year at the country’s drivers’ expense. When the policy was lifted in June, Chinese crude imports soared to a record level of around 13 MMBbl/d
    • The artificial floor helped fuel blendstock imports as well, as the refineries were able to take advantage of collapsing prices overseas
  • Natural gas is down 2.1c to $2.921/MMBtu
  • Working gas in the U.S. netted an early seasonal withdrawal last week, but warmer weather forecasts could reverse the trend in the weeks ahead
    • Storage inventories declined by 36 Bcf to 3.919 Tcf for the week ended October 30, according to the Energy Information Administration
    • The withdrawal was larger than the -31 Bcf consensus Bloomberg estimate
    • The draw was in contrast to the 49 Bcf build reported during the same week last week last year as well as the five-year average gain of 52 Bcf, according to EIA data
  • Comstock Resources, a pure-play Haynesville producer, plans to grow production and capital spending over the next year as it looks to capture higher gas prices in 2021 and 2021, executives said on their Nov. 5 earnings call
    • The company hopes to see high single-digit production growth next year after adding a fifth and sixth rig in Q3 and a third completion crew in Q4
    • In 2021, Comstock plans to add a seventh rig
    • “We should lean in to 2021,” Comstock CEO Jay Allison said
    • Executives said the company’s plan to add a seventh rig in mid-2021 would also be contingent upon a similar level of hedging for calendar 2022 – much like the 60-70% target the company has for 2021

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