WTI is heading for a modest weekly gain, up about 40c from the start of the week
Bloomberg noted that WTI prices at the Magellan East Houston terminal are trading higher, to a $1.50/Bbl premium to Cushing, on concerns that freezing temperatures could lead to power outages and supply disruptions
US and Britain launch airstrikes on Yemen in response to shipping attacks (Reuters)
Dozens of air strikes occurred last night in retaliation to attacks on shipping vessels by the Houthi rebels operating in Yemen
President Biden said, "These targeted strikes are a clear message that the United States and our partners will not tolerate attacks on our personnel or allow hostile actors to imperil freedom of navigation,"
The US said the strikes were intended to damage the ability of the Houthis to launch attacks against vessels in the Red Sea
Oil prices climbed on fears of a wider escalation or the further involvement of Iran
Major oil tanker owner halts Red Sea voyages (BBG)
Following the US airstrikes, Danish shipping firm Torm has stopped allowing its vessels to travel through the Red Sea, citing further risks to the waterway
The number of oil tankers diverted from the Red Sea has so far remained relatively small compared to container ship reroutes, with Trafigura estimating that 15-20% of the usual tanker traffic has been rerouted
A long-term closure of shipping in the Red Sea could lead to demand for oil tankers rising by 12%, due to longer shipping times
Natural gas prices extend rally supported by expectations of extreme cold and a bullish storage report
February ’24 Henry Hub is up 10.6c this morning to trade around $3.203/MMBtu
The Winter ‘23/’24 strip is up 9.3c to $2.927, and the Summer ’24 strip is up 2c to $2.807
The EIA reported a larger-than-expected 140 Bcf draw for the week ending Jan 5, with current inventories at 3,336 Bcf, which is 436 Bcf above last year's and 348 Bcf above the five-year average
The weather model indicates a significant warm-up in the 11-15 day period, with the Lower 48's average temperature rising by +7o F, surpassing the 10-year average in all regions except the Southeast
Lower 48 gas production fell by 0.37 Bcf/d today to 101.71 Bcf/d, with significant drops in the Rockies and South Central; weekly flows are down 0.79 Bcf/d (Criterion)
Rockies saw a notable reduction from 11.45 Bcf/d in early January to 10.46 Bcf/d currently, with further declines expected next week due to freeze-offs
Texas power market stakeholders mull emergency pricing ahead of looming cold front (S&P)
ERCOT stakeholders met on Jan. 10 to discuss a new Emergency Pricing Program (EPP) amid severe cold weather forecasts from Jan. 15-17, potentially straining the Texas power system and increasing power prices
ERCOT's weather watch for Jan. 15-17 anticipates extreme cold, higher electrical demand, and potential reserve shortages, with load forecasts peaking at over 81.6 GW, potentially setting a winter record
The new EPP, mandated by the Texas Legislature, will lower the price cap from $5,000/MWh to $2,000/MWh during high-demand periods, with ERCOT compensating for costs exceeding $2,000/MWh
Moderating gas production lends support to the US Northeast cash market (S&P)
Appalachian shale's production in January 2024 is about 700 MMcf/d lower than the record 36 Bcf/d seen in December
A trend of declining Appalachian gas production from December to January has been common, with rig count dropping by 14 rigs year over year
Reduced rig activities and well completions are leading to lower production, expected to average 35.4 Bcf/d in January and further decrease to 35 Bcf/d by March
Producers like Antero Resources and EQT expect that this production cut will support prices, as seen in the recent rise in cash price at Eastern Gas South
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