Nat Gas Up, SPR, Oil, Distillates, Product supply Low

RJS, Focus on Fracking

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Summary: Natural gas price hits 164 month high after doubling in 2 months; SPR at a 1058 week low, total US oil supplies at a 746 week low; distillates supplies at a 729 week low, total oil + products inventories at a 711 week low, gasoline imports at a 8 month high; natural gas rigs at a 31 month high..

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Natural gas prices hit 164 month high after doubling in 2 months

Oil prices rose for the third time in four weeks after the EU advanced a plan to phase out imports of Russian oil . . . after rising 2.6% to $104.69 a barrel last week as fears of lower supplies from Russia outweighed concerns about reduced demand from China, the contract price for US light sweet crude for June delivery opened lower and tumbled more than 3% early Monday on forecasts of weak economic growth in China following restrictive lockdowns of millions in Shanghai, and as the U.S. dollar rallied ahead of this week’s Fed meeting, when a half point interest rate hike was expected, but bounced off the $100 a barrel level to rally late and finish trading 48 cents higher at $105.17 a barrel, triggered by reports that OPEC was only able to raise their output a little over 40,000 bpd, with their production shortfall growing to 200,000 bpd last month . . . but oil prices slipped out of the gate again on Tuesday, as demand worries stemming from China’s prolonged COVID-19 lockdowns outweighed the prospect of a European embargo on Russian crude, and their losses accelerated in afternoon trading as traders positioned ahead of the weekly release of U.S. inventory data, and the likelihood for the biggest Fed rate hike since at least 2000, and settled $2.76 lower at $102.41 a barrel . . . however, oil prices jumped 3% in Asian trading on Wednesday  after the American Petroleum Institute reported a larger-than-anticipated draw from US oil supplies and after the EU spelled out plans to phase out their imports of Russian oil, and then accelerated higher in afternoon trading, sending both major crude benchmarks 5% higher, after the Fed raised interest rates half a percent and the EIA reported a much larger-than-expected drop in domestic fuel stocks due to higher demand for gasoline and diesel, as front month oil prices settled $5.40 higher at $107.81 a barrel…oil continued higher in early trade Thursday, after the OPEC and Russian-led cartel agreed on a small, incremental production increase in June, sticking to their earlier plan, despite the European Union’s decision to embargo Russian oil, and then jumped 3% to over $111, after CNN leaked news of the administration’s “long-term buyback plan” to partially refill the SPR, before paring its gains  amid a 5% stock market selloff, as traders reassessed the risk that the Fed’s aggressive interest rate hikes would tilt the U.S. economy into a recession, with oil closing just 45 cents higher at $108.26 a barrel . . . oil climbed for the third straight session during mid-morning Asian trade on Friday, erasing earlier losses, as concerns lingered over the prospect of tighter supplies after the EU’s embargo on Russian oil, and closed the week at a six week high of $109.77 a barrel, $1.51 higher on the day, as impending sanctions on Russian oil raised the prospect of tighter supply and had traders shrugging off worries about global economic growth . . . oil prices thus ended 4.9% higher on the week, with energy traders completely fixated on the looming European sanctions on Russian oil, and none willing to be on the wrong side of a major crude supply disruption…

Meanwhile, natural gas prices rose for the seventh time in eight weeks and traded at their highest price levels since 2008 all week, as cold weather turned hot, leading to early demand for cooling . . . after rising 8.7% to $7.244 per MMBtu last week after Russia began to cut off gas supplies to European countries for nonpayment, the contract price of natural gas for June delivery opened 2% higher on Monday as domestic supply remained constrained by sluggish production and an enduring inventory deficit, and closed 23.1 cents higher at $7.475 per MMBtu, on forecasts of warmer-than-usual weather for the next two weeks, which would increase cooling demand and keep storage injections lower than normal during the season for the greatest inventory builds . . . natural gas prices then surged 9% to their highest level since 2008 on Tuesday, as fallout from the Ukraine war wreaked havoc on global energy markets, but backed off the $8 level to end 47.9 cents higher at $7.954 per MMBtu . . . but natural gas prices shot right past $8 early Wednesday, as inventory concerns mounted ahead of a summer that promised high demand, and settled 46.1 cents higher at $8.415 per MMBtu, with underwhelming gas production, tight U.S. supplies, and forecasts for hot conditions across Texas and surrounding states into early next week seen as the primary drivers of spiking natural gas prices . . . natural gas prices rallied to their 3rd consecutive 13 year high on Thursday, and approached the $9 level, before settling with a 36.8 cent increase at $8.783 per MMBtu, as hot spring weather boosted air conditioning demand, while much higher global prices kept demand for LNG exports strong . . . however, after pushing to a hair below $9 at $8.996 early on Friday, natural gas prices tumbled 74.0 cents or more than 8% to $8.043 per mmBTU, as traders took profits on forecasts for a rise in output, milder weather and a drop in demand for the next two weeks . . . natural gas prices still ended 11% higher on the week, and remained at a level more than double that at the beginning of this year, which is fairly evident in the daily price graph we have included below…

To the left is a screenshot (click on chart to enlarge) of the interactive natural gas price chart from barchart.com, which I have reset to show daily natural gas prices over the past 6 months . . . this same chart can be reset to show prices of front month or individual monthly natural gas futures contracts over time periods ranging from 1 day to 30 years, as the menu bar on the top indicates, and also to show natural gas prices by the minute, hour, day, week or month for each…each bar in the graph above represents the range of natural gas prices for a single day, with days when prices rose indicated in green, and days when prices fell indicated in red, with the small sticks above or below each daily bar representing the extent of the price change above or below the opening and closing price for the day in question . . . likewise, the bars across the bottom show trading volume for the days in question, again with up days indicated by green bars and down days indicated in red . . . you’ll note that by positioning our cursor over December 31st, indicated by a thin vertical line, we have caused that day’s natural gas prices to be displayed in green in the upper left corner of the graph . . . there we can see that natural gas prices closed at $3.579/mm BTU on that date, clearly less than half of any price seen this week . . . in fact, we can also see that natural gas traded below $4 on February 11th, so gas prices have more than doubled in less than two months..

The EIA’s natural gas storage report for the week ending April 29th indicated that the amount of working natural gas held in underground storage in the US rose by 77 billion cubic feet to 1,567 billion cubic feet by the end of the week, which still left our gas supplies 382 billion cubic feet, or 19.6% below the 1,949 billion cubic feet that were in storage on April 29th of last year, and 306 billion cubic feet, or 16.3% below the five-year average of 1,873 billion cubic feet of natural gas that have been in storage as of the 29th of April over the most recent five years . . . the 77 billion cubic foot injection into US natural gas working storage for the cited week was 16 billion cubic feet more than the average forecast for a 61 billion cubic foot injection from an S&P Global Platts survey of analysts, but it was close to the average injection of 78 billion cubic feet of natural gas that have typically been added to our natural gas storage during the same week over the past 5 years, while it was well more than the 54 billion cubic feet that were added to natural gas storage during the corresponding week of 2021…