TODAY'S Gas and LNG Pricing Comments From Our Aussie Energy Expert

 

Mining.com.  The IEA just came out with their monthly report… headline – grabbing sentence that they had in there was that oil markets might "drown" in over-supply due to rising inventories. 

Oil & Gas Journal Report Applies to Alaska and Canada: “Given the cost of restarting production, many producers will continue to take the loss in the hope of a rebound in prices,” says Robert Plummer, WoodMac vice-president of investment research….​  (How long can this possibly go on, we ask….  -dh)

Supremes Stay EPA Coal Dictates

EPA Carbon Rule, Michael Whatley, Consumer Energy Alliance, Dave Harbour PhotoUpon hearing news that the U.S. Supreme Court issued a stay on the EPA’s massive Clean Power Plan regulations, CEA executive vice president, Michael Whatley (NGP Photo) had the following reaction:

“CEA is pleased with the Supreme Court’s decision to stay the Clean Power Plan pending lower court action. Compliance with the plan presents states and utilities with significant challenges, to say nothing for the cost and effort associated with producing the plans necessary to achieve future compliance.

“In granting the stay, the Supreme Court has indicated that justices are suspicious of the Clean Power Plan and its radical restructuring of the U.S. electricity grid, generation fleet, and consumer impacts. They have also spared states and consumers the burden and cost of creating compliance plans for a rule which has a good chance of being invalidated by one or more courts.

“The last thing that energy consumers need is for states and electricity providers to take major steps to comply with a rule and then have the rule invalidated – especially when those steps will very likely raise rates across the country. If future courts validate the rule, the states can begin to work on implementation at that point – with nothing lost except a small lag in the rule’s schedule.”

Journal of Commerce by Elwood Brehmer.  A lack of progress in negotiations between the state’s producer partners on major Alaska LNG Project agreements is likely to throw the project off schedule, according to a key member of the Walker administration.

Deputy Department of Natural Resources Commissioner Marty Rutherford said in an interview that BP, ConocoPhillips and ExxonMobil are still working on the structure of the Alaska LNG Project’s critical Gas Balancing Agreement after more than a year of negotiations.

Rutherford is the state’s lead negotiator for commercial terms on the project, Gov. Bill Walker has said.

The Gas Balancing, or gas supply, Agreement is the underpinning contract for at least seven more issues that must be resolved within several months to keep the project on

Journal of Commerce by Elwood Brehmer.  Anchorage’s electric utilities have partnered to purchase part of a Cook Inlet natural gas field, a move that secures a long-term fuel supply and could save ratepayers up to $9 million per year, utility leaders said Monday.

TODAY'S Comments From Our Aussie Energy Expert:

Commodity prices

Crude prices jumped around yesterday – with Brent pretty flat by the end of its trading day at US$30.84, whilst WTI closed down ~3% at US$27.45.

Good "numbers" from the EIA's weekly report did not help. Crude inventories went against predictions earlier in the week by falling by 0.8 mmbbls (admittedly offset by a build in product numbers of 2.6 mmbbls).

Deeper into the numbers, very high figures at the WTI pricing node of Cushing encouraged a Goldman Sachs source to reiterate the vampire squid's pronouncement of late last year that US$20/bbl could be seen as absolute on-shore storage limits were reached.

Reported increased OPEC production numbers also were seized upon by the bears.

Henry Hub was down ~2% at US$2.05.

LNG and international gas

Emboldened by its success in re-negotiating an LNG purchase deal from Qatar, India's Petronet is now reported as seeking a price reduction from a potentially tougher supplier: Exxon.

Petronet has a purchase contract with Exxon from Australia's massive Gorgon LNG project – with a reported price per mmbtu of ~14.5% of crude benchmarks – i.e. considerably higher than current spot and new contract pricing.

If even the mighty Exxon buckles, then predictions of wide-spread contract re-openings will be on globally.  The LNG market will be watching this carefully.