First Look

October 11, 2019

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  • WTI is up 72c to $54.27/Bbl, and Brent is up 74c to $59.84/Bbl
  • Oil prices are higher this morning after an Iranian-owned oil tanker was attacked in the Red Sea off Saudi Arabia’s west coast on Friday, according to Iranian media
    • The vessel Sabiti was hit, probably by missiles, damaging the ship, according to the National Iranian Tanker Company (NITC)
    • There has been no claim of responsibility for the incident and information has only come from Iranian sources
    • AEGIS notes that this latest attack has and will, at least for a short period of time, add back some geopolitical risk premium into oil prices
  • Call option skew has returned in Brent following the alleged attack on an Iranian-owned ship
    • Brent call options are fetching a premium versus the puts – Brent 2nd-month 25-delta skew is now 1.247 percentage points in favor of the calls
  • Freight rates on the benchmark Middle East Gulf-to-China crude tanker route increase 23% to a new YTD high of 175.42 industry-standard Worldscale points on Thursday (Bloomberg)
    • This equates to daily earnings of $158k for the time charter
    • This morning’s attack could add to VLCC rates that are already sky high due to US sanctions on Chinese shipping company COSCO
  • Natural gas is down 0.8c to $2.210/MMBtu
  • Cove Point is expected to be wrapping up its annual maintenance any day now given its three-week maintenance schedule
    • The return of the liquefaction facility would bring back almost 0.8 Bcf/d of demand to the Appalachia region
    • Maintenance began approximately around September 20
  • The 11-to-15-day forecast is showing above-average temperatures creeping in along the East Coast
    • The East Coast has significant population centers, meaning that warmer weather, near the end of the month, could stymie the start of winter heating demand
    • Storage withdraw season generally tends to begin around the start of November
      • However, this year’s withdraws could get delayed if warm weather persists into November
  • Gas storage rose by 98 Bcf for the week ending October 4, 7 Bcf more than the corresponding week last year
    • Total stocks are now at 3.415 Tcf or 0.3% less than the 5-year average