December 4, 2018

By December 5, 2018First Look

December 4

Crude Oil:

  • WTI is up 77c to $53.72/Bbl, and Brent is up $1.14 to $62.83/Bbl
  • Crude oil rallied yesterday with help from easing tensions between the US and China
    • Both countries agreed to a 90-day truce in a trade dispute
    • The US will not go ahead with the planned increase in tariffs to 25% on Jan. 1 from the current 10% tax on Chinese goods
    • The China/US truce pushed equities much higher yesterday as well as adding downward pressure on the dollar
  • Reuters reports that OPEC+ is working towards a deal that would remove 1.3 MMBbl/d, citing four sources
    • So far, Russia’s reluctance to a major cut has been the main road block
    • Russia has said over the past few weeks that they are ok with prices around $60/Bbl
  • Western Canadian Select (WCS) crude surged higher yesterday to over $30/Bbl
    • The price action came as Alberta’s government announced it intends to mandate production cuts to the tune of 325 MBbl/d for several months
      • The mandate will go into effect on January 1
    • AEGIS notes that there was substantial improvement in the spot market for Canadian crudes and Bakken prices
      • It’s interesting that spot prices improved so dramatically above and beyond yesterday’s broad rally since spot represents the physical market and mandated crude cuts do not start until next year
        • One possible reason for higher spot prices yesterday is that a few Canadian producers have already curtailed production over the past few weeks

Natural Gas:

  • Natural gas is up 14.2c to $4.481/MMBtu
  • Big picture narrative stills holding together in this morning’s weather models
    • Colder period slightly weaker at times
    • 11-15 day warmer period is also weaker
  • Cheniere Energy appeared closer to exporting its first cargo from its LNG terminal in Texas as an unladen tanker that docked there over the weekend remained at the site on Monday (Platts)
    • Since liquefaction started up at the terminal near Corpus Christi on November 14, feedgas delivers have picked up, even as netbacks to the facility have declined significantly due in part to rising domestic gas prices and higher transportation costs
  • Qatar announced it will quit OPEC to focus on gas in a swipe at Saudi Arabia, the de facto leader of the oil exporting group is trying to show unity in tackling an oil price slide (Reuters)
    • Qatar will attend the OPEC meeting scheduled for Thursday and Friday in Vienna and would abide by its commitments, but will be focusing on their gas potential
    • Doha is an influential player in the global LNG market with annual production of 77 million tonnes per year, based on its huge reserves in the Gulf