This WEEK's market

Week’s summary: Gas sustains its rally on strong fundamentals, crude ends the week strong on Syria news; exports of both crude and gas ramping up.

Quote of the week

Busts sow the seeds for the next boom. They not only ravage supply and investment, they encourage demand.
— Robert McNally, President, the Rapidan Group. McNally predicts another oil bust in 2018/2019 with prices back down to the $30, level, followed by a rebound by 2021/2022 to $100.

Industry News

Cheniere announced that it has shipped its 100th LNG cargo from Sabine Pass, which makes for an average of 1 cargo every 4 days since the first shipment from Train 1 last February. Our projections, based on domestic balances and global LNG prices, are for Sabine to operate close to maximum capacity all summer.


Analysts at the DUG Permian conference estimated Permian Basin values between $175,000 and $220,000 per acre. Bill Marko of Jefferies Group and Mike Kelly of Seaport Global Securities were referring to stacked-pay acreage in premier locations in the basin, and accounting for tight spacing and advanced completions. The estimates dwarf the estimated $60,000 per acre paid last year by QEP resources. Marko also projected that the Permian will become “the largest oilfield in the world”, surpassing Saudi Arabia’s largest fields.

April’s US national average bidweek natural gas price was $2.93/MMBtu, up 48 cents from March levels.

Fundamental update

China has surpassed Canada as the largest customer for US crude oil. Falling OPEC production and competitive US prices, as well as the lifting of the export ban, has facilitated increased usage of US crude by China. Total US crude oil exports are estimated for February at over 1 million barrels per day for the first time in history. (official EIA data is only out through January)

Bloomberg energy analysts are estimating a below-normal end-of-summer NG storage inventory of 3.6 Tcf, which is 7% below the 5 year average. This is despite entering the season currently at 14% over the average. The shortage is due to only a slight anticipated rise in production, and increased exports to Mexico and via LNG as well as somewhat lower imports from Canada. The report cautions that higher prices will spur more production as well as dampen power generation demand, which should correct the deficit.