May 17, 2019

By May 17, 2019First Look

May 17

Crude Oil:

  • WTI is up 48c to $63.35/Bbl, and Brent is up 23c to $72.85/Bbl
  • Brent is poised for its biggest weekly gain since mid-February as Middle East tension in the Persian Gulf escalate (Bloomberg)
    • The Brent July-December spread is at its strongest point in life of the contract
      • The stronger backwardation between Jul-Dec has edged to 3.36 from a recent low of -0.40 in late December
    • OPEC and its allies will gather this weekend to discuss output policy and political tensions
    • The group’s main meeting takes place in late June
  • Tensions in the Middle East continue to rise after the Saudi’s carried out attacks in Yemen against Iran-backed Houthi rebels and President Trump ordered the deployment of aircraft to the region
    • Trump sent an aircraft carrier group, B-52 bombers and Patriot missiles to the Middle East
      • At the same time, staff were evacuated from the US embassy in Baghdad
    • AEGIS notes that as long as tensions remain elevated in the Middle East crude will likely stay supported

Natural Gas:

  • Natural gas is up 1.2c to $2.651/MMBtu
  • US natural gas in storage rose by 106 Bcf last week to now total 1.653 Tcf (EIA)
    • The 106 Bcf injection was above consensus expectations of an injection between 93 and 108 Bcf
    • Stocks are at a 130 Bcf surplus to the year-ago level of 1.523 Tcf
  • Williams’ bid to bring 400 MMcf/d of incremental natural gas supply into New York markets hit a major stumbling block late Wednesday when the New York State Department of Environmental Conservation denied a water quality certification for a pipeline expansion (Platts)
    • The project isn’t expected to come online until 2020 winter to help ensure reliability of supply to local distribution companies delivering gas into New York City and Long Island
  • In the past, this area has been very susceptible to price shocks, this project was meant to provide some relief in the gas stricken area and help stabilize prices during the heating seasons