By Barani Krishnan
Investing.com – Jerry Jones, majority shareholder of Comstock Resources (NYSE :), is toasted on Twitter for suggesting the Texas-based shale gas drill will hit the jackpot on skyrocketing gas prices as millions of Texans are in part this week Have frozen to death with no gas to heat their homes.
Let’s analyze whether the so-called jackpot holds up in gas prices without debating Jones’s morale. Also, let’s examine whether the oil bears might be lucky with a deeper correction in crude oil markets after Friday.
As the week drew to a close, Texas energy companies prepared to resume and promote production after days of frozen stoppages as electricity and water supplies slowly resumed in darkened oil fields and refineries.
It is not yet clear how long it will take to restore all lost supplies. However, oil traders and executives hope that most of the lost production will return within days when temperatures rise and electricity becomes available.
At its peak, almost 40% of US oil production was shut down due to the extreme cold and associated power outages. Three quarters of the US tailcoat fleet was lost this week. 41 crews worked to blast water, sand and chemicals underground to release trapped oil and gas, said Matt Johnson, CEO of Primary Vision Inc.
Already company, including Marathon oil Corp (NYSE 🙂 and Devon Energy Corp (NYSE 🙂 has started using restored power from local area grids or generators to restart the output, according to those familiar with the matter.
Chevron Corp (NYSE 🙂 has also begun restoring shale production, although natural gas production will have priority.
ConocoPhillips (NYSE :), the leading independent US oil producer, stands ready to resume full operations at its US operations outside of Alaska following the end of power and other infrastructure outages. But like Chevron, the focus will be on gas first.
“Most of our Permian and Eagle Ford volumes remain offline,” said Conoco spokeswoman April Andrews, referring to the two major Texas oil fields.
On Friday’s settlement, the front-month contract for New York’s Henry Hub closed a definitive trade for $ 3.08 million British thermal units after the session officially closed at $ 3.07 per mmBtu . It was up 5.4% from the week. The benchmark gas contract had actually gained four straight weeks, up 26% since the week ended January 15.
But the gas billing on Friday also fell by 0.4% on the day and was well below the weekly high of USD 3.32. That means one thing: gas prices are falling – and could be further corrected.
The warmer temperatures are on the way, paving the way for a thaw in Texas and elsewhere.
“The worst of the coldest temperatures have passed as conditions gradually weaken in the coming days,” said forecaster NatGasWeather, adding that temperatures in the region between the central continent and the southeast instead of lows of minus 20 degrees 30s could prevail.
But there is also a theory that Henry Hub futures could hit $ 4 before this winter is over in case other extremities like Texas emerge.
“We’re cautious, we need close watch in early March as it wouldn’t be much colder if the pattern quickly looked more intimidating,” said NatGasWeather in an expert opinion.
The last time Henry Hub gas hit $ 4 was between November and December 2018, when it traded at highs between $ 4.50 and nearly $ 5.
As I discovered on a Thursday, Henry Hub futures would have to rise another 25% to get to $ 4. That could be a big question, especially when the worst winter is over. NatGasWeather also warns that mild temperature trends could take “a more bearish stance”.
So back to Jones, it seems that the natural gas jackpot that the Comstock Resources billionaire was so obsessed with this week may be dwindling soon – unless there are more surprises in the Arctic ahead.
On the oil front, crude oil prices fell more than 2% on Friday as they saw their biggest slump since January amid fears that refineries could be the next victims of the Texas storms – resulting in a buildup of crude oil supplies.
While oil production resumed in Texas on Friday, lack of demand from refineries is likely to spike it over the coming weeks, even though around 3.5 million barrels of US oil production per day has ceased, ANZ Research said in a notice.
Citigroup analysts said in a separate release that some U.S. refineries could have around 500,000 bpd of maintenance work normally scheduled for the spring of next month before the summer driving season.
Crude oil prices were also put under pressure on Friday by assurances from the Iranian Foreign Minister that the Islamic Republic would “immediately reverse” its nuclear program as soon as the US sanctions are lifted.
Mohammad Javad Zarif reiterated Tehran’s position in response to Washington’s offer to revive talks between the two sides.
The Biden administration said Thursday that the United States was ready to speak with Iran about reinstating a 2015 agreement to prevent the country from acquiring nuclear weapons.
“There have been some sales of reports that Iran has promised to act and that the US may again participate in the Iranian nuclear talks,” said Phil Flynn, an analyst with Price Futures Group in Chicago.
The nuclear deal signed under former President Barack Obama was abandoned almost three years ago by his successor Donald Trump.
President Joseph Biden, who was Obama’s vice-president, says he will revive the deal if Iran, which has augmented uranium capacity by up to 20% to protest Trump’s crippling sanctions on Iranian oil, takes back its actions.
Iran, at the height of its production before Trump’s sanctions, pumped 4 million bpd and exported at least half of that.
Analysts said the impact of Tehran’s production could be mitigated by production cuts by Saudi Arabia and other members and allies of the Organization of Petroleum Exporting Countries (OPEC), although market tremors over the nuclear talks could still limit the three-month oil price rally.
On the precious metals side, prices rose for a second straight day on Friday, halting a six-day decline that led to June lows.
Despite the yellow metal’s ability to stop more bleeding, support for so-called inflation hedge and safe haven appeared weak at best.
“Gold is having a hot time,” said Craig Erlam, market strategist for online brokerage OANDA.
“Even the retreat we’ve seen gold in the past few days couldn’t save him. Instead, higher real returns in the US are piling misery on the yellow metal. It fell below $ 1,760 today, its lowest level since early July, yet another sign that the near-term outlook is far from positive. “
The idea of gold as an inflation hedge or a safe haven against most economic and political troubles has been broken in the last few months since vaccine breakthroughs for Covid-19 pushed the yellow metal from record highs in August of nearly $ 2,090.
With President Joe Biden introducing a new $ 1.9 trillion stimulus after nearly $ 4 trillion spent under his predecessor Donald Trump, the potential U.S. budget deficit and debt under such spending should be closer burden the dollar as gold.
But that has risen instead, driven by an increase in the price of gold that has caused a number of setbacks.
Fawad Razaqzada, an analyst at Think Markets, agreed with Erlam that things weren’t great and they weren’t looking good for the bullion.
He said investors have wondered whether rising bond yields are a good thing (as they indicate better economic conditions) or a bad thing (as they reduce the likelihood of further incentives), Razaqzada added.
The geopolitical risk component that has held gold for decades has all but disappeared. The yellow metal has fallen rather than rising due to a recent flare-up in tensions in the Middle East.
Oil price and market summary
New York-Traded, the key indicator of US crude oil, was last traded at $ 59.04 on Friday. The session officially closed at $ 59.26, down $ 1.27 or 2.1%. For the week, WTI only fell 0.5%.
London-Traded, the global benchmark for crude oil, was last traded at $ 62.72 on Friday. The session was officially set at $ 62.91, down $ 1.02, or 1.6%. For the week it was up 0.8%.
Energy calendar ahead
Monday February 22nd
Private Cushing Inventory Estimates
Tuesday February 23
Weekly report on oil stocks.
Wednesday February 24th
EIA weekly report over
EIA weekly report over
EIA weekly report over
Thursday February 24th
EIA weekly report over
Friday February 25th
Baker Hughes Weekly Poll on
Gold Price & Market Summary
Benchmark gold futures for New York’s Comex were last traded at $ 1,783.35. Friday’s trading officially closed at $ 1,777, up $ 2.40, or 0.1% on the day. For the week, April gold was down 2.5%.
last traded at $ 1784.13, up $ 8.38 or 0.5%. For the week it was up 0.4%, the first increase in six weeks.
Disclaimer: Barani Krishnan uses a range of views outside of his own to diversify his analysis of each market. As an analyst for Investing.com, he presents different views and market variables.
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