Gas Could Be Bright Spot in Petroleum Complex

Gas Could Be Bright Spot in Petroleum Complex
Need a respite from the bad news in the oil market?

In this preview of what to watch in the oil market this week, panelists interviewed by Rigzone offer an outlook that will unlikely inspire optimism. If you need a respite from the bad news, however, keep reading to find out why one market-watcher anticipates increasing prices in one corner of the petroleum complex: Henry Hub natural gas.

Tom Seng, Assistant Professor of Energy Business at University of Tulsa’s Collins College of Business: As May WTI breaks the $18 per barrel support level, global demand for oil looks to have dropped by 25 to 30 million barrels this month. Only deep production cuts by all countries will stem this tide. Some major producers in the U.S. and Canada have formally announced supply curtailments, but many, many others will have to follow suit.

Andrew Goldstein, President, Atlas Commodities LLC: With the front spread (May/June) in WTI trading at $7.20 and spot month expiring on April 21, I look for the price of June WTI too fall to May levels, upon May expiration. The lack of demand for both jet fuel and gasoline will continue as stay-at-home orders for COVID-19 are being extended throughout the country. Additionally, I look for the price of precious metals to continue to rise as energies weaken.

Steve Blair, Senior Account Executive, RCG Division of Marex Spectron: The weekly U.S. Department of Energy (DOE) report indicated that distillate demand declined by over 1 million barrels per day, which we believe is most likely an aberration and we we would not be surprised to see an upward correction in next week's DOE report. (For background on recent DOE data, check out Friday’s article on developments last week in the oil market.)

Mark Le Dain, vice president of strategy with the oil and gas data firm Validere: Everything points to natural gas doing well. Demand has held up and associated gas producers are forced to shut-in as condensate is getting negative all-in prices in many places in North America. Combine this with still-declining gas rig counts, and near-term prices should continue to climb.

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