October 3, 2019

October 3, 2019
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  • WTI is down 65c to $51.99/Bbl, and Brent is down 39c to $57.30/Bbl
  • US crude inventories rose by 3.1 MMBbl to 422.6 MMBbl last week amid a sharp drop in refinery runs, according to the EIA
    • Last week’s inventory build marked the third straight week of builds and was the largest weekly increase in crude stocks since the end of May
    • Oil prices sold off after the government’s data release on Wednesday
  • Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, said the kingdom has stabilized production at 9.9 MMBbl/d (Bloomberg)
    • Prince Salman also said oil output capacity is at 11.3 MMBbl/d and is still committed to the OPEC+ limits
    • AEGIS notes that oil prices are now lower than the Friday before the Saudi attacks on September 14
      • Through Cal 20 the curve has retreated by about $2/Bbl and about $1/Bbl in Cal 21 from September 13 levels
  • The cost of shipping American crude is getting more expensive after the US sanctioned Chinese shipping company COSCO (Bloomberg)
    • Bloomberg data showed oil companies booked three tankers over the past few days to transport crude from the US Gulf Coast to Asia for a lump-sum price of at least $10 million
    • To put it in context, it cost about $92.5 million to buy a new supertanker and operate for 15-20 years
    • Bloomberg points out that with shipping cost surging thanks to sanctions, a vessel could pay for itself in about nine charters, based on current market rates
    • AEGIS notes that soaring shipping cost narrows or even closes the arbitrage to ship crude to Asia from the US
  • Natural gas is up 0.6c to $2.253/MMBtu
  • Prompt month natural gas prices have fallen 12 days in a row, breaking yesterday’s previous record
    • Today could continue this losing streak, as analysts estimate another triple digit storage build for the week ending September 27
    • LNG feed gas demand, which, since last Friday, has fallen 0.7 Bcf to 5.8 Bcf/d, is not benefiting prices either
    • Weather models are forecasting cooler weather for the next 15 days, however the overall picture is still very mild
  • The November tenor for Dominion South basis has sold off roughly $0.30 over the last five weeks
    • Part of the reason for the selloff could be Cove Point’s continued maintenance shut down
    • The other part could be a very bearish reaction to mild shoulder season weather
    • We will discuss, in depth, Dominion South’s recent impact on other downstream basis markets in tomorrow’s Market Summary

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