September 3, 2020

September 3, 2020
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  • WTI is down $1.08 to $40.43/Bbl, and Brent is down $1.10 to $43.33/Bbl
  • Oil futures in New York traded near $40/Bbl Thursday morning, after the deepest drop since July as concerns grow over OPEC supply and fuel demand
    • Iraq may seek a two-month extension to implement its compensatory cuts, indicating it won’t be able to reduce production as quickly as previously promised (Bloomberg)
    • Profit from making diesel plunged on Thursday to the lowest since at least 2011 in Europe, signaling that demand is still weak
  • Crude oil’s recent price weakness is also due to a rally in the dollar
    • The dollar has moved higher the past three days, off its two-year low set on Monday
  • The EIA reported a decline in U.S. crude oil stocks for the sixth consecutive week, the first time inventories dipped below 500 MMBbl since early April
    • Crude inventories fell 9.4 MMBbl to 498.4 MMBbl last week as offshore production tumbled because to two Gulf of Mexico storms
    • Domestic oil production dropped to 9.7 MMBbl/d, a decline of 1.1 MMBbl/d from the prior week
      • The amount of oil still shut-in in the Gulf is 368 MBbl/d or 19.9%, according to the Bureau of Safety and Environmental Enforcement (BSEE)
  • Natural gas is up 1.6c to $2.502/MMBtu
  • The EIA is expected to report a 34-Bcf injection for the week ending August 28, which would be much less than the 77-Bcf build in the corresponding week of last year
    • Analysts estimates ranged from a build of 27 Bcf to 48 Bcf
    • A build within this range would bring total stocks near 3.454 Tcf and the surplus to the five-year average near 406 Bcf
    • The current end-of-season storage number is being offered on ICE at 4.0 Tcf, an increase from 3.975 Tcf last week
  • The JKM prompt month contract has rallied by 25c over the last week to settle at $4.225/MMBtu on September 2, 2020
    • Power outages in Louisiana, Texas have stymied the U.S Gulf Coast LNG recovery that was expected after Hurricane Laura
    • The 2.0 Bcf/d Gorgon LNG site in Australia faces additional delays as the company announced that the Train 2 repairs are taking longer than expected. Chevron has said that they intent to bring the unit online in October, a revision from their earlier plans of an early September startup date
    • AEGIS notes, the outages at LNG facilities will likely put upward pressure on Japan-Korea Marker (JKM) prices, widening the LNG arbitrage for U.S. LNG exports
  • The Bureau of Safety and Environmental Enforcement (BSEE) provided an update on GoM production outages in the wake of Hurricane Laura
    • The BSEE estimated 19.65% of gas production (532.55 MMcf/d) is still shut in, an improvement from 49% reported on Monday
    • The BSEE announced that only 9.18% of production personnel were still evacuated from 59 platforms

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