Texas markets

Volatility returns to oil markets this week; West Texas Intermediate ends above $110 a barrel

Volatility returned to oil markets this week as prices fell on a rollercoaster ride and then rallied back past the $100 level.

West Texas Intermediate on the New York Mercantile Exchange sank $10 in the first two trading sessions of the week – $6.68 on Monday and another $3.33 on Tuesday, sending prices below $100 a barrel. Prices then regained their footing, climbing $5.95 on Wednesday. WTI rose $4.36 or 4.1% on Friday to close the week at $110.49, down from $103.09 at Monday’s close and $109.77 at last Friday’s close. The list price ended the week at $106.97, according to Plains All-American.

Natural gas prices followed the trajectory of crude on the NYMEX, starting the trading week dipping from $1.01 per Mcf to just over $7 per Mcf. Prices then rose for the next three days, including a 36-cent rise on Tuesday and a 25-cent gain on Wednesday. Prices fell 7.6 cents on Friday to end at $7.663 Mcf, down from $7.026 at Monday’s close but well below $8.043 at last Friday’s close.

High commodity prices have helped fuel inflation, prompting producers to ramp up business and increase production, including from government officials, to meet growing demand and drive down prices. Operators say they are increasing their business while adhering to their commitment to capital discipline.

“With commodity prices at levels we haven’t seen in nearly 10 years, CPX remains focused on finding creative ways to grow our core footprint in the Delaware Basin through structured outsourcing opportunities. with operators who are capital or resource constrained,” John Roby, chief executive officer of CPX Energy, told The Reporter-Telegram via email.

“CPX’s technical and operations team has built strong relationships with service companies in a low price environment that today allows us to stay ahead of supply chain challenges and staff shortages in the field. CPX currently has an active drilling rig in Loving County and plans to continue to drill our inventory efficiently to accelerate reserves and cash flow.

Edward Moya, senior market analyst, Americas, with OANDA, wrote in a newsletter that the focus for much of the week was on the European Union’s inability to reach agreement on a ban on Russian oil, “which suggests we won’t have an immediate response.” shock in the oil market.

Moya said prices rallied over the week on optimism that the COVID situation in China has not worsened and risky assets have rebounded.

“The outlook for crude demand will not collapse as the United States enters peak driving season and European air travel remains strong,” he wrote in his newsletter.

Moya noted that the number of U.S. rigs has continued to rise, “but until energy markets see higher levels of production, oil prices are likely to remain supported here.”

In its short-term energy forecast for May, the US Energy Administration predicts that West Texas Intermediate will remain above $100 a barrel through June, then drop into the $90s, ending the year at $94.86 a barrel. barrel. The agency’s forecast ranges from a low of $48.31 to a high of $186.30 in December.

The EIA also forecasts U.S. crude production to average 11.9 million barrels per day this year and a record 12.8 million barrels per day in 2023.

“A high level of uncertainty remains in our outlook, but we have always expected high crude oil prices to help drive up record annual U.S. oil production levels in 2023,” the administrator said. the EIA, Joe DeCarolis, in the forecast. “Low global oil inventories, coupled with continued high demand for gasoline, diesel and other petroleum products, mean increased production is unlikely to have much impact on prices in the short term. term.”

The Henry Hub natural gas price will average $8.59 per million British thermal units in the second half of 2022, an increase of 88% from the second half of 2021. This forecast is a significant revision to the forecast previous years, largely because the EIA updated its power generation modeling to better take into account changing coal market constraints.