11
May
Wrap – Week Ended 5/10/24
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Decent week that landed on a soft note with the ZLT only up 2.4% on the week and 14.9% on the year. Earnings season has one last, light volume, week left. Results to date have been largely in line with expectations for the upstream and slightly better than expected for oil service holdings.
- Most upstream names maintained maintenance budgets and reaffirmed or very slightly boosted volume guidance on the oil side while natural gas names continued to hold the curtailment/declines lines.
- For our niche Oil Service names stability of pricing and steady demand, rising into year end, remain the rule.
- Our small renewables segment (<10% of the portfolio), continues to languish and while there are some signs of light at the end of the tunnel project calendars continue to shift to the right putting more weight on the end of the year.
- Look for a 1Q24 quarterly post mortem piece soon.
A few comments on the table below.
Oil:
- Long vs short Nymex physical WTI fell below our comfort threshold two weeks ago week and was at 2.7x last week. Expect increased volatility.
- Iraq's comments over the weekend, if not further addressed, will pressure prices early next week.
- We get the OPEC MOMR next week and we do not expect their demand forecast for 2024 to fall. We expect IEA forecast demand to edge higher.
- Refining margins are flashing warning signs at current levels. At this time we still expect 2024 US throughput to slightly edge 2023 but this narrows if we get much more deterioration in prices. Distillate demand remains softer than expected.
Natural gas:
- US fundamentals continue to be increasingly positive. This is covered in the weekly slideshows, the NG Macro page, and the charts of interest in each Friday post and in the links at left.
- Supply:
- Production continues to trend lower.
- LNG exports are recovering in the expected time frame with Freeport's return to service.
- Exports to Mexico are elevated (record for time of year of late) and Canada is up vs year ago but small and the increase is benign in the big picture.
- Supply is therefore trending down.
- Production continues to trend lower.
- Demand:
- Existing the shoulder R&C demand becomes a lot less important.
- Powerburn is setting weekly records ahead of the real heat of the coming season. This is a fun chart:
- Storage is well over stored coming out of last year's non winter and aided by unexpected LNG downtime.
- Shorts are on the run and our view is that prompt gas is a bit ahead of itself at this time.
- Supply:
Questions and comments under The Wrap will be addressed in the Monday post.
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Thanks to all the moms out there. We hope you have a wonderful weekend,
Z
Iraq walking back cut comments from yesterday.
May 12th, 2024 at 6:51 am