Oil and Natural Gas Hit New Highs

RJS Focus on Fracking

Summary: Oil price sees highest weekly close in 13 years; natural gas price hit new 13 year high before falling back

Oil prices rose for a seventh consecutive week as record high fuel prices showed no signs of dampening demand. After rising 3.3% to $118.87 a barrel last week as China ended their lockdowns and the EU banned 90% of Russian oil imports, the contract price for US light sweet crude for July delivery jumped to over $120 a barrel in early trading Monday. After Saudi Aramco unexpectedly raised its selling prices for oil to Asia, sparking concerns over tightening global supplies, but faded in afternoon trading to settle 37 cents lower at $118.50 per barrel, as traders weighed risks of a potential US recession against supply disruptions in Russia and Libya . . . but oil prices moved higher again on Tuesday, on reports of an expected demand recovery in China and settled 91 cents higher at a three month high of $119.41 a barrel, as traders anticipated that the weekly US inventory data would show commercial crude oil inventories had declined again. Oil prices then dipped in after hours trading after the American Petroleum Institute unexpectedly reported a crude inventory build, but moved higher early Wednesday despite the likely rise in U.S. oil supplies. On the easing of Chinese lockdowns and on a possible strike by Norwegian oil workers, and then jumped to a 13 week high after the EIA reported US demand for gasoline kept rising despite record pump prices, and on expectations China’s oil demand would rise amid supply concerns in several countries, and settled $2.70 higher at $122.11 a barrel, after the EIA’s monthly Short-Term Energy Outlook forecasted that oil prices would stay above $100 per barrel through the whole year….however, oil prices pulled back early Thursday as renewed Covid-19 controls in parts of Shanghai outweighed the robust demand for refined fuels in the US, but still hovered near three-month highs before settling 60 cents lower at $121.51 a barrel, with RBOB (gasoline) and ULSD (diesel) futures advancing more than 1.5%, supported by low inventory levels in the US and globally, as summer travel demand was seen recovering to pre-pandemic highs.

Oil prices moved higher in early trading Friday ahead of the release of the consumer price index, which was expected to show persistently high inflation continued in May amid an ongoing surge in prices for retail gasoline. but turned lower after the report as traders weighed the impact of China’s bumpy return from its virus curbs and settled down 84 cents on the session at $120.67 a barrel as higher than expected inflation had suggested even more aggressive rate hikes that sent the dollar flying, making commodities priced in the greenback, including crude, costlier for non-holders of the currency…oil prices still managed a 1.5% increase on the week, with the week ending closing price the highest since 2008, on signs of persistent shortages despite the Chinese lockdowns, more OPEC supply and the US SPR release….

Natural gas prices also reached their highest level since 2008 this week before falling back, as a rally on record high temperatures was cut off after an explosion at an LNG export terminal. After falling 3.3% to $8.523 per mmBTU last week as June forecasts had turned cooler, the contract price of natural gas for July delivery opened almost 6% higher on Monday and rose 79.9 cents to a 13 year high of $9.322 per mmBTU, on record power demand in Texas, and on forecasts for hotter weather and higher demand than had been expected, while pipeline maintenance concurrently impacted supplies. Prices eased a bit on Tuesday, slipping 2.9 cents to $9.293 per mmBTU, as an early rally faded as traders took profits while low wind power forced Texas power generators to burn more gas to keep the air conditioners running. However, natural gas prices plunged 59.4 cents or 6% to $8.699 per mmBTU on Wednesday on news of an explosion at the Freeport liquefied natural gas (LNG) export terminal on the Texas coast. Despite the loss of demand from that plant, prices moved higher again on Thursday on ongoing record power demand in Texas, a smaller-than-usual storage build, rising spot gas prices, low wind power and a decline in gas production for the month.and settled 26.4 cents higher at $8.963 per mmBTU…but prices eased 11.3 cents to $8.850 per mmBTU on Friday, as traders continued to weigh the implications of a potentially prolonged outage at the Freeport LNG terminal, which would make the gas intended for export available for domestic consumption or lead to storage increases…but prices still ended 3.8% higher on the week, albeit off 47.2 cents or 5.1% from Monday’s close….

The EIA’s natural gas storage report for the week ending June 3rd indicated that the amount of working natural gas held in underground storage in the US rose by 97 billion cubic feet to 1,999 billion cubic feet by the end of the week, which still left our gas supplies 398 billion cubic feet, or 16.6% below the 2,299 billion cubic feet that were in storage on June 3rd of last year, and 340 billion cubic feet, or 14.5% below the five-year average of 2,339 billion cubic feet of natural gas that have been in storage as of the 3rd of June over the most recent five years….the 97 billion cubic foot injection into US natural gas working storage for the cited week was close to the average forecast for a 96 billion cubic foot injection from an S&P Global Platts survey of analysts, and just a bit less than the average injection of 100 billion cubic feet of natural gas that had typically been added to our natural gas storage during the same week over the past 5 years, and also a bit less than the 98 billion cubic feet that were added to natural gas storage during the corresponding week of 2021…