October 14, 2019

October 14, 2019
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  • WTI is down $1.11 to $53.59/Bbl, and Brent is down $1.12 to $59.39/Bbl
  • Oil futures slide as optimism over the US-china trade deal fades
    • President Trump announced on Friday that the US had reached an interim deal with China that would delay tariff increases set for this week
    • However, China wants more talks as soon as the end of this month to work out the details of the “Phase one” trade deal outlined by Trump before China signs it (Reuters)
  • Tanker freight rates continue to soar, reaching a new YTD high if 313.33 industry-standard Worldscale points on Friday for the benchmark Middle East Gulf-to-China crude tanker route
    • The Worldscale value of 313.33 equates to about $300 thousand in daily earnings, up 90% from the previous day and the highest since February 2017 (Bloomberg)
    • Freight rates have been higher recently after the US levied sanctions on China’s shipping company COSCO, but soared even higher after an alleged attack on an Iranian-owned crude vessel on Friday
    • AEGIS notes that tanker rates are important for US oil prices as the surplus of light crude oil needs to be exported to avoid swelling inventories
  • Natural gas is up 8.5c to $2.299/MMBtu
  • Open long positions on natural gas contracts fell to 105,689, a 52-week low according to the CFTC
    • Short positions grew by 42,548 contracts, the biggest one-week rise in shorts since February 2018
    • Given the huge concentration in shorts, the emergence of an unexpected bullish catalyst could result in another short squeeze fueled pop in gas prices
  • LNG feed gas demand has officially cracked 7.0 Bcf/d as Dominion’s Cove Point facility returns from its scheduled three-week maintenance (Platts)
    • The return of +0.7 Bcf/d demand could help support Dominion South basis which has been under pressure recently
      • That pressure has partially stemmed from reduced southbound flows on Enbridge’s Texas Eastern Line after a deadly explosion back in August
      • Maintenance on the line is expected to continue through 2Q2020
  • The 11-to-15-day weather forecast is looking more promising as colder weather is projected to move in across the central and eastern portions of the United States
    • This is a bullish sign for natural gas as November is typically marks the beginning of storage withdraws

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