25
Jan
Wrap – Week Ended 1/24/20
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Panic. Not advice, we don't do that. But panic was the story of last week.
For oil, the coronavirus impact is unknown but negative and traders more often than not hit the sell button in uncertain times when demand is in question. Even with over 1.5 mm bopd of incremental unplanned outages (Libya, Kazakhstan, Nigeria, Iraq) arriving at the same time (far more than any disruption from a new virus could be, historically speaking) they just sell. Also note that we've recently swung towards the upper end of the range of longs vs shorts for non commercials and often at that point, only a little news is needed to push prices rapidly in either direction. We don't pretend to know the ultimate impact of the virus on travel but for now it would appears well discounted and likely to keep a lid on any names who might of been thinking about $55+ type budget. It also is more than likely to prompt OPEC+ to extend their curtailments well beyond March.
For natural gas the lack of a real winter has driven prices rapidly lower, and has emboldened the shorts (see graph below the Wrap table). As noted in a number recent posts, we've seen poor winters before, and while production growth is already falling (curtailments are behind this) and demand is rising (exports, generation and industrial), this will, for a time be masked by the storage levels and smaller than average withdrawals. Spring and summer are now set for record gas-fired demand, record exports, and ebbing production (even the EIA STEO has natural gas demand ebbing after 1Q20).
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Free stuff this week:
- PE - reaffirmed 2020 volumes, cut 2020 capex, increased dividend, sporting significant free cash at a $50 deck.
- COG - low cost producer, low valuation, generates free cash below others and just above $2.00 gas.
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Questions and comments will be addressed in the Monday Post.
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The Blotter is updated.
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Need to contact us? Send us a note at zman@zmansenergybrain.com
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We had Ebola back in 2015 or so which didn’t seem nearly as communicable as people thought
Curious how this one plays out. Seems much more sensationalized than SARS back in 2003
January 26th, 2020 at 1:15 amre1 Baylor I left you a response friday last post.
January 26th, 2020 at 2:04 pmThanks JamesT
January 26th, 2020 at 3:54 pmWTI $52.50 at futures open
DJIA off 300
Lot of panic underway, local doc offices have signs up saying they are screening all patients for coronavirus.
January 26th, 2020 at 7:02 pmSaudi says OPEC+ has ability to flex to meet lower demand from virus.
January 26th, 2020 at 7:04 pmOf five rockets fired tonight, three rockets in direct hit on US embassy in Iraqi capital, including one on cafeteria: security sourc
January 26th, 2020 at 7:06 pmOil with a $52 handle
Unreal
January 26th, 2020 at 9:26 pmI’ll probably move the 401k to sidelines tomorrow while this plays out
January 26th, 2020 at 9:27 pmKobe’s death might have something to do with oil going down. Why not?
January 26th, 2020 at 10:48 pm