Oil and Gas

Bad news for those counting on high energy prices to help Putin turn public opinion against the war. Good news for the rest of us

Europe Natural Gas Prices Fall as EU Leaders Unite to Back Crisis Measures - Bloomberg

Natural gas in Europe declined after leaders came together to back urgent measures, including a price cap, to contain the energy crisis that’s engulfed the economy.

Benchmark futures fell 11% on Friday, posting a third straight weekly loss. The politicians asked the European Commission to propose a “temporary dynamic price corridor,” and said they would pursue a framework to cap the price of gas in electricity generation. They also want to take steps to avoid extreme price spikes and use the EU’s joint purchasing power in negotiations with sellers.
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The outcome of the summit will bring some relief to markets, with gas prices still three times higher than the five-year average for this time of the year. They have eased more than 60% from their August peak, as Europe started the winter heating season with almost full reservoirs and strong liquefied natural gas flows.

 

this will help with our electricity price here which is helping to drive inflation

Nat-Gas Prices Fall On Forecasts For Warm U.S. Temps (barchart.com)

Nov nat-gas prices Wednesday extended this week's losses and posted a 3-1/2 month nearest-futures low on a weak demand outlook. The Commodity Weather Group on Wednesday said that above-average temperatures are expected for the Midwest and East Coast for the rest of this month, reducing heating demand for nat-gas.

Lower-48 state total gas production on Wednesday was 99.3 bcf, up +5% y/y. BNEF data showed lower-48 state U.S. nat-gas production on Oct 3 climbed to a record high of 103.6 bcf. Lower-48 state total gas demand Wednesday was 78.3 bcf/day, up +23% y/y. LNG net flow to U.S. LNG export terminals Wednesday was 12.0 bcf/day, up +11% w/w.

A decline in U.S. electricity output is bearish for nat-gas demand from utility providers. The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended Oct 15 fell -3.8% y/y to 70,244 GWh (gigawatt hours). However, cumulative U.S. electricity output in the 52-week period ending Oct 8 rose +2.0% y/y to 4,113,318 GWh.

 

Russian oil and gas is in a death spiral. Recall that it wasn't until Iran couldn't get insurance on their tankers that they got serious about going to negotiating table. That hammer is getting ready to fall on Russia with the new EU sanctions. US oil expertise, and their replacement parts and management practices, are leaving. Sounds like even the limited sanctions that were in place have cratered production in some of their bigger fields. Once production drops and income drops, management changes to Russian run, spare parts dry up, things break, it just goes downhill from there. See Venezuela

Sakhalin oil project hints at the potential collapse of Russian output when new EU sanctions take effect (msn.com)

A Russian oil project led by Exxon Mobil saw production tumble after the US company refused to accept local insurance for tankers, offering a potential clue on what could happen to Moscow's energy sector after new European sanctions take hold. Sources told Reuters that output at the Sakhalin-1 Russian Pacific project cratered to just 10,000 barrels per day this year from 220,000 bpd before Russia invaded Ukraine. Production collapsed after Western companies stopped insuring tankers operated by state-run Sovcomflot, which was targeted by an earlier round of sanctions, according to Reuters.

Exxon's Russian unit, Exxon Neftegas, has had trouble chartering tankers because of the sanctions and has refused to work with Sovcomflot, the report said.
An Exxon spokesperson told Insider that the company announced in March its intent to take the steps required to exit the Sakhalin-1 project, discontinue its role as operator, and no longer invest in projects in Russia.

"Exiting has been a complex process, and we have remained committed to operating in a manner that protects the safety of employees, the environment, and the integrity of the Sakhalin-1 project," Exxon said in an emailed statement. "With its two recent decrees, the Russian government unilaterally terminated our interests in Sakhalin-1, and the project has been transferred to a Russian operator. We are reserving our legal rights under the production sharing agreement and international law."
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The production collapse at the Sakhalin project precedes a new round of European Union sanctions, which will include a broader ban on insurance for Russian oil tankers, that go into effect on December 5.

 

The US now has just 25 days of diesel supply — the lowest since 2008. Here's why that's more alarming than a dwindling 'oil piggy bank' (msn.com)

The U.S. is facing a diesel crunch just as demand is surging ahead of winter — with only 25 days of supply left, according to the Energy Information Administration. National Economic Council Director Brian Deese told Bloomberg TV that diesel inventories are “unacceptably low” and “all options are on the table” to bolster supply and reduce prices.

However, even as the stockpiles are being drained, the Biden administration seems to be left with very few sustainable options for long-term relief.
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The market usually moves into “contango” — the opposite of backwardation, where demand is lower and suppliers build up inventory with the expectation of higher future prices — in the summer. However, strong domestic and international demand, shrinking domestic refining capacity and sanctions on Russian petroleum imports have kept the diesel market tight throughout the year.

 

this is surprising. hopefully it helps drive down the price of electricity and that helps bring inflation down. just more prrof that we need more pipeline capacity to get our natural resources to market

Natural gas prices in Texas shale country just turned negative amid booming production (msn.com)

West Texas natural gas prices turned negative for the first time since 2020 on Tuesday, as booming production and pipeline-capacity constraints left local supplies with nowhere to go.

At the Waha hub in the Permian Basin, gas for next-day delivery sank to negative $2 per million British thermal units Tuesday, traders told Bloomberg. Just a week ago, prices there were $5 per million BTUs, and benchmark US prices are currently at $5.55.

That means gas producers are paying people to take their supplies. Prices in the heart of Texas shale country were negative eight times times in 2020 and more than two dozen times in 2019, according to data compiled by Bloomberg.

The latest bout in the red comes as the region is seeing a surge in production, lower demand, and distribution bottlenecks, resulting in a localized glut.

 

Oil Sinks Further Amid China Concerns, Weakened Economic Prospects (msn.com)

Oil prices extended recent losses on Tuesday as markets remained cautious amid signs of weakening Chinese demand, while a slew of dismal economic indicators also brewed concerns over global crude appetite.

Crude prices marked a weak start to the week after data showed China’s crude imports sank 2% in September, amid continued headwinds from COVID-linked restrictions. The country, which is the world’s largest crude importer, increased its oil imports as local fuel demand weakened.

Data also showed that the Chinese economy grew more than expected in the third quarter. But Beijing’s recent commitment to maintaining its zero-COVID policy darkened the outlook for the world’s second-largest economy.

Weaker-than-expected business activity indicators from Japan, the Eurozone and the U.S. also pointed to slowing economic activity in the world’s largest economies, possibly indicating more headwinds for global crude appetite.

 

Maybe OPEC+ was on to something when they decided to announce theoretical cuts in production

Oil Inventories Rise by More Than Expected 4.5 Million Barrels Last Week: API (msn.com)

U.S. crude inventories increased by 4.5 million barrels for the week ended Oct. 21, the API reported, compared with estimates for a rise of 200,000 barrels, and a draw of 1.3 million barrels reported in the previous week.

The API data also showed that gasoline inventories fell 2.3 million barrels last week, while distillate stocks climbed by 635,000 barrels.

The official government inventory report due Wednesday is expected to show weekly U.S. crude supplies rose by 1.0 million barrels last week.

 

EU has contracted for so much LNG that their import terminals in Spain are overloaded and backed up.

Dozens of LNG-laden ships queue off Europe's coasts unable to unload | Reuters

Dozens of ships carrying liquefied natural gas (LNG) circling off the coasts of Spain unable to secure slots to unload have prompted grid operators for the country to warn they may have to suspend loading to deal with this "exceptional situation".

The region has had to find alternative supplies, including LNG, but the arrival of multiple cargoes of the superchilled fuel has exposed Europe's lack of "regasification" capacity, as plants that convert the seaborne fuel back to gas are operating at maximum limit.

If the backlog is not cleared soon those ships may start looking for alternative ports outside Europe to offload their cargo.

There are more than 35 LNG-laden vessels drifting off Spain and around the Mediterranean, with at least eight vessels anchored off the Bay of Cadiz alone, traders, analysts and sources at LNG terminals familiar with the situation said on Monday.

 

I also saw hospitals vacated due to lack of electricity and 500+ line crews concentrated across a 2 county area urgently working to restore the grid because it is needed for a hell of a lot more than charging teslas. I also saw a town running on solar and underground grid take a direct hit and not lose power. I read of people dying from carbon monoxide fumes. No one energy source solves all problems