Oil and Gas Bulletin: WTI & Brent Rise, Natural Gas Falls, and Ongoing Strikes in the Red Sea Region
WTI and Brent Add to Gains; Natural Gas Down Despite Colder Temperatures Forecast; International Coalition Continues Strikes on Houthi Targets near Red Sea
Dow +0.37%, S&P 500 +0.23%, Nasdaq +0.07%, Russell 2000 +0.85%
US equities finished higher in Tuesday trading, staging a rally into the close. Treasuries were firmer, the Dollar index was down( 0.3%) and Gold settled up +0.4%. The S&P 500 Energy Index closed up +0.66% versus the S&P 500 which gained +0.03%. The XLE is up +0.71%, the XOP gained +1.45% and all oil and gas E&Ps closed higher, with oil E&Ps outperforming.
WTI crude and Brent added to yesterday’s gains, settling up +0.7% to $73.31 and +0.9% to $78.59 respectively, while natural gas closed down (3.5%) despite colder weather in the forecasts. Houthi attacks on commercial and naval vessels in the Red Sea, which have reached more than 30 in total since mid-November. This week, an international coalition led by the US and the UK struck 36 Houthi targets across 13 locations in Yemen in response.
Tuesday’s notable energy gainers were Tellurian ($TELL) which closed up +33.3%. The company is exploring the sale of its Haynesville upstream assets in an attempt to raise capital for its Driftwood LNG project. ChampionX ($CHX) gained +9.18% after reporting Q4 results. The company missed revenue but its adjusted EBITDA slightly beat consensus and guidance. Precision Drilling ($PD) was up +1.62 after its Q423 EBITDA came in above consensus. The company lowered debt by $152M in 2023 and plans to retire an additional $150M-$200M of debt this year.
Industry decliners during the day were Hess Midstream ($HESM) which fell by (3.95%), and Diamond Offshore Drilling ($DO) which dropped by (0.95%) after it announced an equipment incident west of the Shetland Islands. The rig has maintained its structural integrity but its lower marine rise package (LMRP) and riser have dropped to the seabed.
Top performers in the PRISM Oil & Gas Index were Battalion Oil Corporation ($BATL) which rose by 9.91%, HighPeak Energy ($HPK) which closed up 5.21%, and Ring Energy ($REI) which was up 4.80%. Index decliners were Trio Petroleum ($TPET), which fell by (25.58%), Houston American Energy Corp ($HUSA) which was down by 3.27%, and Permex Petroleum ($OILCF) which lost 3.07% during the day. The PRISM Oil & Gas index value is $126.50 and performance is up by +26.50% since inception.
Trader’s Lens
$OXY is trading near the low end of its trading range of the past couple of years, and earnings for $OXY are currently scheduled for Feb 14, after the close. It was also disclosed today that Warren Buffett’s Berkshire Hathaway bought an additional 4.3M shares with the shares being acquired at an average price of $57.15, according to an SEC filing.
$PDS, the largest drilling rig contractor in Canada gapped up today after announcing strong fourth-quarter earnings results for 2023 this morning.
$BATL stock has been falling the past couple of weeks ever since its deal to be acquired by Fury Resources seems in danger of falling through. After Fury made an initial deposit of $10 million, it missed its second required deposit and may need an extension for any hope of the deal going through.
Prism Analysis
Freezing Temperatures Impact US Natural Gas Production
Freezing January temperatures across the United States severely impacted natural gas production, causing disruptions in supply and raising concerns about potential shortages.
Today’s Top Headlines
Middle East Peace Deal
Secretary of State Blinken is in the Middle East attempting to broker a peace deal. Reuters reported that a ceasefire offer was delivered to Hamas last week and is awaiting a reply from militants who say they want more guarantees. Israeli PM Netanyahu visited troops yesterday and stated, “We will not end the war without achieving that goal of total victory that will restore security”.
Natural Gas Consumption Sets New Record
A new daily record for natural gas consumption was set by the lower 48 (L48) states on January 16, 2024, consuming 141.5 Bcfd. Consumption in the L48 averaged above 130.0 Bcfd from January 14 through January 21, 2024, as arctic air pushed south, causing temperatures to fall. Extreme wind chills, freezing rain, and snowy conditions persisted from the Pacific Northwest into Texas and across the Northeast and mid-Atlantic.
