Crude: Spare production capacity going to all-time lows

Natural gas

U.S. dry natural gas production averaged 73.6 billion cubic feet per day (Bcf/d) in 2017. EIA forecasts dry natural gas production will average 81.2 Bcf/d in 2018, establishing a new record. EIA expects natural gas production will rise again in 2019 to 83.8 Bcf/d.

Growing forecast: U.S. natural gas production supports increasing forecasted liquefied natural gas (LNG) exports. LNG exports averaged 1.9 Bcf/d in 2017. EIA forecasts LNG exports to average 3.0 Bcf/d in 2018 and 5.1 Bcf/d in 2019. Dominion Energy’s Cove Point LNG facility is ramping up exports. In April, the facility exported an estimated 13.4 Bcf, implying baseload utilization of 65%, and in May, it exported an estimated 23.5 Bcf, implying baseload utilization of 94%.

EIA expects Henry Hub natural gas spot prices to average $2.99/million British thermal units (MMBtu) in 2018 and $3.08/MMBtu in 2019. NYMEX futures and options contract values for September 2018 delivery that traded during the five-day period ending June 7, 2018, suggest that a range of $2.38/MMBtu to $3.57/MMBtu encompasses the market expectation for September Henry Hub natural gas prices at the 95% confidence level.

The EIA predicts that U.S. oil imports will be at the lowest level since 1959. Still, it raised the forecast for Brent crude oil spot prices in 2018 and 2019. The forecast for Brent crude oil is for spot prices to remain above $70 per barrel this year, as global oil demand outpaces supply. Global oil supplies have been lower than expected, notably because of outages in major oil producer, Venezuela. Our forecast indicates Brent crude oil prices will decline to an average of $68 per barrel in 2019, as U.S. crude oil production continues to grow at a rapid pace. Yet, the current outlook for U.S. crude oil production continues to expect robust growth, with production increasing by more than 15% from 2017 to 2018, eclipsing an average of 11 million barrels per day during the fourth quarter of 2018.

The wWeekly report will be watched as well, but the Fed statement may move oil more! The Fed will raise rates and the trade is worried that the dot plot for future rate increases may slow oil demand. Still the EIA comes first. The API reported that API Crude +833k (-1.25mm exp) • Cushing -730k (-900k exp) Gasoline +2.33mm Distillates +2.1mm .

The EIA’s June outlook increased the forecast for U.S. dry natural gas production this year. We now expect production to increase by more than 10% from 2017, reaching a record 81 billion cubic foot in 2018.

Increased production and added infrastructure have positioned LNG exports for considerable growth in 2018 and 2019. EIA’s June outlook is that U.S. LNG exports will exceed an average of 5 billion cubic feet per day in 2019, compared to last year’s average of just under 2 billion cubic feet per day. Assuming the forecast holds, U.S. exports of LNG will more than double over a 24-month period.

Reuters reported that rising demand on both the domestic and overseas fronts spurred a cut in the U.S. Agriculture Department’s outlook for corn and soybean stockpiles, the government said on Tuesday. In its monthly supply and demand report, USDA pegged soybean ending stocks for the 2017/18 crop year at 505 million bushels, down from 530 million bushels a month ago. It boosted its soybean usage by crushers to 2.015 billion bushels, up 25 million bushels. For the 2018/19 marketing year.

On the corn front, USDA pegged 2017/18 ending stocks at 2.102 billion bushels, down 80 billion bushels from May. That was below the low end of analysts’ estimates that ranged from 2.132 billion bushels to 2.192 billion bushels. The government raised its 2017/18 corn export outlook by 75 million bushels to 2.300 billion. USDA said that corn exports in April hit a record high, topping the monthly shipping record set in November 1989. For 2018/19, corn ending stocks were seen at 1.577 billion bushels. In May, USDA pegged corn ending stocks at 1.682 billion bushels. USDA boosted its 2018/19 ethanol usage estimate to 5.675 billion bushels, up 50 million bushels from May. USDA also pegged domestic wheat ending stocks at 1.080 billion bushels for 2017/18, up 10 million bushels from May, and at 946 million bushels for 2018/19, 9 million bushels lower than May. 

Do you ever feel a little isolated? Now that President Donald Trump has cut a deal with North Korea, Iran is feeling a little isolated and they are warning them not to trust him. I think Iran is worried that the Rouge nation club might be getting smaller soon. 


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