Geosteering—Are We There Yet?

Geosteering—Are We There Yet?

PART 1 of 3—OVERVIEW

In the last 36 months, 34,070 horizontal wells have been completed in the U.S. This represents about 12% of all horizontal wells drilled, and since the last three years have seen a big uptick in both activity and technology improvement in unconventional play development, I thought it was a good time to dig into geosteering data to get some perspective on this critical piece of the unconventional puzzle.

Of the horizontals completed in the last three years, nearly 14,000 have been analyzed in our Play Assessments application for characteristics, such as percentage of well bore in landing zone, toe in landing zone, and footage in landing zone.

How good of a job have we done getting our horizontals into their targeted landing zones to maximize the productive potential of our unconventional resource play acreage?

Using our highly quality controlled DI Play Assessments data, we can start taking a look at these 14,000 wells to see where operators landed their wells.

Since wells with a relatively high percentage of out-of-zone drilling within targeted landing zones will negatively affect play economics, I thought I’d look at wells, by basin, in Play Assessments with 25% or more of lateral length out of zone. The graph below shows the percentage (displayed logarithmically) of wells, by basin, that had less than 75% of their wellbore positioned in the intended landing zone.

Note that the DJ, Gulf Coast, and Williston were the most likely basins to see wells out of zone (DJ 35%, Gulf Coast 13%, Williston 21%).

In contrast, the basins that showed the highest percentages of wells 90% or greater in zone were the Central Basin Platform at 94%, Mid-Continent at 91%, and Midland Basin at 90%. What accounts for the differences?

Operators in the three Permian sub basins—Delaware, Central Basin Platform, and Midland—are doing a great job of landing their wells in zone and keeping them there.

But what’s going on the Williston and DJ in particular?

These are the most targeted landing zones by basin (source: DI Play Assessments).

BAKKEN

For the 23 operators that have completed any wells in the last three years with at least 25% of the wellbore out of Middle Bakken landing zone, nearly one quarter of them account for almost 45% of the out-of-landing-zone wells.

Since the percentage of total wells completed with more than 25% of lateral out of zone in the Middle Bakken in the last three years is about 16%, is this operator dependent or geologically driven (high faulting, rapid lithologic changes, challenges of staying in zone in high dip areas)?

 

Since the out-of-zone wells are not concentrated in one part of the basin, this implies that geology, faulting, or steep dip complications are not the drivers of out-of-zone performance.

Most of the large operators have done a good to excellent job of keeping their wellbores in their landing zones.

DJ

If we look in DI Play Assessments at the 10 operators in the DJ that account for 93% of the wells landed in the Niobrara B, their in-zone landing performance is also quite variable.

Plotting these on a map also shows spatial variability in the position of these wells, again implying that the out-of-zone performance in the DJ is most likely operator driven and not tied to geologic complexity.

 

In Part 2, I’ll look at identifying the most problematical landing zones.

Please send me an email at mnibbelink@drillinginfo.com if you have any observations on or comments about geosteering challenges.

Triple-Digit Gas Injection Meets Market Expectation

Triple-Digit Gas Injection Meets Market Expectation

Natural gas storage inventories increased 106 Bcf for the week ending May 10, according to the EIA’s weekly report. This injection meets the market expectation, which was an inventory increase of 105 Bcf.

Thus far in 2019, lower-48 dry natural gas production is ~7.03 Bcf/d higher than the same period in 2018, while natural gas demand is up ~4.66 Bcf/d for the same period. Since injections started this season for the week ending March 29, 2019, total inventories have increased 546 Bcf. In 2018 for the same time frame, storage showed an injection of 155 Bcf.

Working gas storage inventories now sit at 1.653 Tcf, which is 130 Bcf above inventories at the same time last year and 286 Bcf below the five-year average.

At the time of this writing, the June 2019 contract was trading at $2.623/MMBtu, $0.022 above yesterday’s close of $2.601/MMBtu.

Prices traded in a narrow range this week for the June 2019 contract, trading between $2.601 and $2.659. The main driver of the price movement has been weather. Forecast changes will continue to be the main price driver as we get deeper into the summer and the expectations regarding how much gas will be needed for power burn becomes more of a reality.

See the chart below for projections of the end-of-season storage inventories as of November 1, the end of the injection season.

This Week in Fundamentals

The summary below is based on Bloomberg’s flow data and DI analysis for the week ending May 16, 2019.

Supply:

  • Dry gas production decreased 0.14 Bcf/d. Most of the decrease came from the South Central/Gulf region, which fell 0.15 Bcf/d.
  • Canadian net imports decreased 0.13 Bcf/d on the week.

Demand:

  • Domestic natural gas demand increased 1.04 Bcf/d week over week. Res/Com demand accounts for most of the increase, gaining 1.18 Bcf/d, mainly due to cooler weather in the East. Power demand showed a drop of 0.35 Bcf/d, while Industrial demand gained 0.21 Bcf/d.
  • LNG exports increased 0.23 Bcf/d week over week, while Mexican exports increased 0.01 Bcf/d.

The ICE Financial Weekly Index report is currently expecting an injection of 110 Bcf. Last year, the same week saw an injection of 91 Bcf; the five-year average is an injection of 91 Bcf.

The Week Ahead For Crude Oil, Gas and NGL Markets – May 13, 2019

The Week Ahead For Crude Oil, Gas and NGL Markets – May 13, 2019

CRUDE OIL

  • US crude oil inventories posted a decrease of 4.0 MMBbl last week, according to the weekly EIA report. Gasoline and distillate inventories decreased 0.6 MMBbl and 0.2 MMBbl, respectively. Total petroleum inventories showed a decrease of 1.7 MMBbl. US crude oil production decreased 100 MBbl/d last week per the EIA. Crude oil imports were down 721 MBbl/d to an average of 6.7 MMBbl/d versus the week prior. (For more analysis of weekly imports, please see the shipping section below.)
  • The WTI stayed within a narrow range for the week, setting both the highs and the lows of the week on Monday. The initial declines seemed to be based on the Trump administration’s announcement of additional tariffs (from 10% to 25% on certain goods) on Chinese imports and forced the market to re-appraise expected global demand. The breakdown of the trade talks brings doubts about the global economic growth that trade has been needing with the recent price run.
  • It is doubtful that the US objective of bringing Iran’s exports down to zero is achievable as China announced they will be continuing imports from Iran. The Venezuelan production declines and the rising geopolitical tensions between the US and Iran, and the potential supply disruptions these tensions are bringing, will continue to provide a strong floor to the declines. These events will also bring the potential for volatility, as the US deployed a carrier strike force to the region, signaling to Iran that any instability provoked by Iran will be met with “unrelenting force,” according to national security advisor John Bolton. The tanker attack on Saudi vessels over the weekend will certainly escalate the tensions between Iran and the US (though no one has claimed responsibility for the attack) and now adds the potential for the Saudis to alter their strategy by producing more to offset the Iranian reductions. This would likely pressure prices, punishing Iran even further.
  • The uncertainties surrounding the upcoming OPEC meeting and any decision regarding the supply cuts are likely to be determined by the effects of the US sanctions on Iran. Currently, with the US continuing its production growth, the expectation that Russia and Saudi Arabia will offset the loss from the Iran sanctions could potentially impact the OPEC decision.
  • The CFTC report (positions as of May 7) showed the Managed Money long component selling 24,164 contracts and the Managed Money short component increasing their positions for the second consecutive week, adding 10,706 contracts. It is becoming clear that the speculative sector is less enthusiastic about the price run that commenced early in the year.
  • The narrow trade range left the market internals with a neutral bias. The range trade brought an increase in volume and a slight increase in open interest (on preliminary data from the CME) as participants evened their positions without a fundamental event to influence directional bias. The attack in the Straits of Hormuz on the Saudi tanker will give the support necessary to raise prices more to the middle of the range. The price on Friday remains at the low end of the recent range, between $60 and $67.
  • Prices may continue to range-trade as the market seeks a fundamental reason to extend out of the range. Should prices extend beyond the range, it will likely be met with tremendous volatility. A break below $60.77 on a daily close will likely set up additional declines to the $57-$58 area from early March. A break above $64.75 will likely take prices back up to the high end of the range at $67.00.

NATURAL GAS

  • Natural gas dry production showed a decrease of 0.39 Bcf/d. Canadian imports also decreased by 0.15 Bcf/d.
  • Res/Com demand declined 3.68 Bcf/d, while Power and Industrial demand decreased 0.40 Bcf/d and 0.36 Bcf/d, respectively. LNG exports gained 0.27 Bcf/d, while Mexican exports increased by 0.21 Bcf/d. These events left the totals for the week showing the market dropping 0.54 Bcf/d in total supply while total demand fell by 4.68 Bcf/d.
  • The storage report last week showed injections for the previous week at 85 Bcf. Total inventories are now 128 Bcf higher than they were last year and 303 Bcf below the five-year average.
  • The CFTC report (as of May 7) showed the Managed Money long sector increasing positions by 7,128 contracts, while the Managed Money short position increased by 6,016 contracts. With prices continuing to consolidate between $2.47 and $2.656, the speculative community expects a retest at the low end of the range (growth in the speculative short position over the last month), but there is a growing level of trade that is taking a more bullish position.
  • Market internals maintain the consolidation nature of the market as volume and open interest increased slightly week over week. Momentum indicators have returned to a neutral position with the increase last week.
  • Prices remain range-bound, but the extension last week took prices higher, to $2.647, the highest level since mid-April at $2.653. This area is a key near-term area for traders as a break above on a daily close will likely take prices up to $2.72. It remains unlikely that this market will see a dramatic move in either direction until the summer demand is better defined. Should the trade not confirm the range expansion up, then a decline to last week’s low ($2.514), and possibly down to $2.47, should be expected. The deferred strips and their price behavior continue to remain positive and should give a clue as to the near-term direction of this market. Declines should bring the winter strip down as well, which did not occur during last month’s declines that went under $2.50.

NATURAL GAS LIQUIDS

  • Purity product prices were down across the board last week. Ethane dropped $0.013 to $0.224, with propane down $0.008 to $0.600, normal butane down $0.046 to $0.652, isobutane down $0.052 to $0.658, and natural gasoline down $0.019 to $1.268.
  • US propane stocks increased ~1.0 MMBbl the week ending May 3. Stocks now sit at 60.0 MMBbl, roughly 21.3 MMBbl and 18.3 MMBbl higher than the same week in May 2018 and May 2017, respectively.

SHIPPING

  • For the week ending May 10, US waterborne imports of crude oil were 3.184 MMBbl/d, according to DrillingInfo’s analysis of customs manifests received up to May 13. That represents a slight decline for the week. The biggest decline in imports was in PADD 1, while imports to PADD 3 increased, surpassing 1.7 million barrels per day for the week.
  • Last week’s EIA report showed preliminary imports from Saudi Arabia at 311 MBbl/d for the week of May 3, the lowest level since the EIA began to report that detail in 2010. Drillinginfo manifest data had imports for Saudi Arabia for the same week at 287 MBbl/d. Imports from Saudi Arabia increased this week, with imports at nearly 544 MBbl/d. So far in May, Saudi imports are below 500 MBbl/d. Should imports from Saudi Arabia remain below that mark, it would be the first time US imports from Saudi Arabia dropped below half a million since May 1987. PADD 3 imports of Saudi crude have actually bounced back since earlier this year, with the main factor being Motiva Port Arthur (Saudi Aramco’s refinery) resuming imports of Saudi crude. On the other hand, PADD 5 imports have been steadily decreasing since January. The big driver of this has been declining imports at the Carson refinery in the Los Angeles area and the Golden Eagle refinery in the San Francisco Bay area. These refineries are now owned by Marathon.
The Week Ahead For Crude Oil, Gas and NGLs Markets – May 6, 2019

The Week Ahead For Crude Oil, Gas and NGLs Markets – May 6, 2019

CRUDE OIL

  • US crude oil inventories posted a substantial increase of 9.9 MMBbl last week, according to the weekly EIA report. Gasoline inventories increased 0.9 MMBbl, and distillate inventories decreased 1.3 MMBbl/d. Total petroleum inventories showed a large increase of 12.7 MMBbl. US crude oil production increased 100 MBbl/d last week per EIA. Crude oil imports were up 265 MBbl/d to an average of 7.4 MMBbl/d versus the week prior.
  • The WTI price regained some of its strength as the market ignored comments surrounding the Trump administration’s conversations with Saudi Arabia. These comments regarding increasing oil flow and keeping gasoline prices in check had a negative impact on prices in the week prior. That enthusiasm was supported with the news of Venezuelan opposition leader Juan Guaido calling on the population and military to seize power from President Maduro. Unfortunately for the rally, the uprising fell short of expectations as the week wore on.
  • The upcoming OPEC meeting and decision regarding the supply cuts will likely hinge on the effects of the Iranian production and the global supply-demand levels. The Saudis mentioned last week that the supply cuts may be extended beyond June depending on the situation.
  • This uncertainty going into the OPEC meeting will lead to a potentially volatile period for oil prices. Last week’s bearish inventory data confirms the potential volatility for the market as petroleum stockpiles grew substantively despite the supply reductions imposed earlier in the year. The market is also digesting the effects of US production as it continues to grow, which will take market share from other producing countries and shows no signals of slowing.
  • The CFTC report (positions as of April 30) showed the Managed Money long component taking some profits by reducing speculative length by 8,969 contracts while the Managed Money short component increased their position for the first time in weeks, adding 5,429 contracts.
  • The price collapse after the inventory release was dramatic and swift, with most of the losses coming on Thursday after traders got a chance to digest the new data point. The declines took prices down to $60.95, just above the commonly traded 200-day moving average, which now sits at $60.95 going into today’s trade. While prices rebounded a little on Friday (hitting $62.52), prices resumed weakness by the end of the day, closing the week at $61.94.
  • Market internals are now neutral bias with the retracement, as prices are now in the lower end of the expected short-term range of between $60 and $67. The volume was down week-on-week but remained strong compared with recent weekly averages. Open interest also gained slightly as prices fell during the week according to preliminary data from the CME.
  • Prices have consolidated, as expected, and are now facing some critical support levels that will need to hold before the market develops a negative bias. The first area is the aforementioned 200-day moving average at $60.95. This is a commonly traded average for the speculative sector, and a close below it (on a daily basis) will likely bring about additional selling and profit taking. These declines may take prices down to the breakout levels between $57 and $58 from early March. Should the critical support level hold and prices catch a bid (as they did early Friday), $62.52 and up to last week’s high of $64.75 will likely find substantive selling. The market may be entering a period of volatility and range expansion, depending on the extent of the rebound off of the support test.

NATURAL GAS

  • Natural gas dry production showed an increase of 0.19 Bcf/d, while Canadian imports increased 0.29 Bcf/d.
  • Demand showed the Res/Com market sector rising 3.27 Bcf/d, while Power and Industrial demand increased 1.99 Bcf/d and 0.18 Bcf/d, respectively. LNG exports showed a gain of 0.34 Bcf/d, while Mexican exports increased 0.05 Bcf/d. Total supply for the week showed a gain of 0.48 Bcf/d, while total demand rose 6.00 Bcf/d.
  • The storage report last week showed injections for the previous week at 123 Bcf. Total inventories are now 128 Bcf higher than at the same time last year and 316 Bcf below the five-year average.
  • The CFTC report (as of April 30) showed the Managed Money long sector reducing positions by 11,358 contracts, while the Managed Money short position increased by 16,955 contracts. These additional increases in the short positions occurred as prices rallied over $2.60 during May expiration, and the rally continued into early last week as June took over as prompt. The speculative sector is clearly expecting a test of the June lows from last month at $2.477 and perhaps more declines beyond that level.
  • Market internals maintain the slightly negative bias, with volume increasing from the previous week and open interest increasing as the prices rebuffed the gains. The market has softened from the oversold momentum levels obtained during the price declines at the end of last month.
  • Prices are continuing in the recent range and following a pattern similar to last year’s, but at lower levels. Early projections of supply growth have the market above 3.5 Tcf at the end of the injection season, based on normal summer demand. It is unlikely this market will see a dramatic move in either direction until the summer demand is better defined. Declines to last month’s low of around $2.43 will find support, and the highs of around $2.65-$2.733 will find sellers. Watching the deferred strips and their price behavior will give a clue as to the near-term direction of this market. If the market breaks below the lows of last month, look for confirmation in the winter strip.

NATURAL GAS LIQUIDS

  • Ethane gained slightly week-over-week, increasing $0.002 to $0.237. All other purity products saw declines in price, with propane falling $0.041 to $0.603, normal butane down $0.072 to $0.698, isobutane down $0.059 to $0.710, and natural gasoline down $0.054 to $1.287.
  • US propane stocks increased ~1.2 MMBbl the week ending April 26. Stocks now sit at 58.9 MMBbl, roughly 22.6 MMBbl and 19.3 MMBbl higher than the same week for April 2018 and April 2017, respectively.

SHIPPING – DI shipping content is produced using DI’s new import manifest tool. Please contact Bert Gilbert (bert.gilbert@drillinginfo.com) for more details.

  • Waterborne crude imports dropped substantially from last week, with data from manifests indicating a drop of more than 1.4 MMBbl/d across the country. PADD 3 saw the biggest drop, falling by nearly 800 MBbl/d week-over-week to 1.436 MMBbl/d. PADD 1 fell to 618 MBbl/d, while PADD 5 fell to 868 MBbl/d. Last week’s bump in PADD 3 imports was driven by higher-than-normal imports from Colombia, Kuwait, and Russia. Imports from those countries fell this week, but imports from Mexico rose to nearly 740 MBbl/d. That represented more than half of overall PADD 3 waterborne imports. Houston took in more than 35% of total imports to PADD 3.
  • Imports from Nigeria have increased slightly, with overall imports from that country reaching the highest since January. The majority of these barrels went to PADD 1, with Phillips 66 Bayway taking the most. However, Valero Texas City did receive a cargo of medium sweet Bonga.

Another April Injection Record with 123 Bcf Inventory Gain Reported

Another April Injection Record with 123 Bcf Inventory Gain Reported

Natural gas storage inventories increased 123 Bcf for the week ending April 26, according to the EIA’s weekly report. This injection is above the market expectation, which was an inventory increase of 118 Bcf.

Working gas storage inventories now sit at 1.462 Tcf, which is 128 Bcf above inventories at the same time last year and 316 Bcf below the five-year average.

At the time of this writing, the June 2019 contract was trading at $2.567/MMBtu, $0.053 below yesterday’s close of $2.620/MMBtu. The May 2019 contract rallied on expiration and closed at $2.566/MMBtu last week.

Another week, another record injection for the month of April. This injection tops the previous April injection record, set by the injections the prior two weeks, by 31 Bcf. These record injections helped inventories jump above last year’s and gain on the five-year average inventories.

Inventories are increasing, but weather is driving price volatility. Warm weather is driving Power demand higher in the Southern region, while cooler weather is driving Res/Com demand up in the East, Midwest, and Mountain regions. This increased demand took the June contract to $2.62/MMBtu for yesterday’s close. However, demand is expected to fall off and be below average throughout May. If that holds true, prices will stay well below $3/MMBtu, and larger-than-normal inventory builds will continue.

See the chart below for projections of the end-of-season storage inventories as of November 1, the end of the injection season.

This Week in Fundamentals
The summary below is based on Bloomberg’s flow data and DI analysis for the week ending May 2, 2019.

Supply:

  • Dry gas production was relatively flat week over week, gaining 0.03 Bcf/d.
  • Canadian net imports increased 0.11 Bcf/d on the week.

Demand:

  • Domestic natural gas demand increased 5.06 Bcf/d week over week. Res/Com demand showed the largest increase, gaining 3.16 Bcf/d. Power demand showed a gain of 1.75 Bcf/d, while Industrial demand gained 0.15 Bcf/d.
  • LNG exports increased 0.20 Bcf/d week over week, while Mexican exports increased 0.28 Bcf/d.

Total supply is up 0.14 Bcf/d, while total demand decreased 5.68 Bcf/d week over week. With the gain in demand outpacing the gain in supply, expect the EIA to report a weaker injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 93 Bcf. Last year, the same week saw an injection of 89 Bcf; the five-year average is an injection of 75 Bcf.

The Week Ahead For Crude Oil, Gas and NGL Markets – Apr 29, 2019

The Week Ahead For Crude Oil, Gas and NGL Markets – Apr 29, 2019

CRUDE OIL

  • US crude oil inventories posted an increase of 5.5 MMBbl last week, according to the weekly EIA report. Gasoline and distillate inventories decreased 2.1 MMBbl and 0.7 MMBbl, respectively. Total petroleum inventories showed a large increase of 8.8 MMBbl. US crude oil production increased 100 MBbl/d last week, per EIA. Crude oil imports were up 1.16 MMBbl/d to an average of 7.1 MMBbl/d versus the week prior.
  • The WTI price exploded upward early in the week on news that the US had decided to cancel Iranian sanction waivers. This bullish announcement added fuel to the directional run that has been based on the supply reductions from OPEC and non-OPEC participants since early this year. The Trump administration’s canceling of the waivers could erase as much as 1 MMBbl/d of additional supply in a market that has already been tightening given OPEC-led supply cuts and declines from Venezuela.
  • The bullish enthusiasm ran into a solid wall in the middle of the week, with the inventory release showing significant gains in crude and total inventory levels. On Friday the run hit another speed bump when President Trump told reporters at the White House that he had “called OPEC” seeking lower gasoline prices and tweeted later that he had discussed increasing oil flows with Saudi Arabia and that “all were in agreement.” There had already been news of discussions between OPEC and Russia about the possibility of lifting the supply cuts during the second half of the year due to concerns that US producers will continue to ramp up production, taking market share in the global market from OPEC and Russia.
  • The Iranian sanctions and the supply cuts impart tremendous significance to the upcoming OPEC meeting in June. While OPEC (primarily Saudi Arabia and UAE) and Russia can offset the impact of the Iran sanctions, the market will have to assess the spare capacity of global supply. This uncertainty, the continued unrest in Libya, and the threats from Iran closing the Strait of Hormuz will likely lead to a volatile period for WTI.
  • The CFTC report (positions as of April 23) showed the Managed Money long component increasing its length by 7,195 contracts while the short component dropped 3,153 contracts. Producers and other participants utilizing swap dealers for hedging risk was up 49,162 contracts in the short sector and represents the largest sector of open interest in the report.
  • The decline on Friday expanded the range of prices to $4.32 for the week following, setting a recent high of $66.60. From there, prices corrected, falling to $62.28 on Friday. The decline sent participants a cautionary signal, but the market internals remain positive to neutral with the momentum indicators backing off over-bought levels. The volume was up week on week (discounted by the holiday-shortened week prior), but open interest did gain slightly during the week.
  • As expected, prices consolidated, retracing to lows from early April trade. The declines during a week that contained the elimination of sanction waivers suggest that expectation had already been part of the price run. As traders continue to digest the headlines, prices are likely to have a higher level of volatility near term than in recent months. The high side of the range that the volatility will test is between $65/Bbl and $68/Bbl, with last week’s high similar to the highs established in January 2018 ($66.66/Bbl). This area held the market for four months before the major break-out in spring and summer 2018. With the weak close, expect continuation of the declines, perhaps testing the support from the March break-out area ($60.00/Bbl) in the coming weeks.

NATURAL GAS

  • Natural gas dry production showed a decrease of 0.60 Bcf/d. Canadian imports also decreased 0.33 Bcf/d.
  • Res/Com demand fell 3.69 Bcf/d, while Power demand increased by 0.76 Bcf/d and Industrial demand fell 0.38 Bcf/d. LNG exports were flat on the week, while Mexican exports increased by 0.41 Bcf/d. These events left the totals for the week with the market dropping 0.93 Bcf/d in total supply while total demand fell by 3.03 Bcf/d.
  • The storage report last week showed the injections for the previous week at 92 Bcf. Total inventories are now 55 Bcf higher than last year’s and 369 Bcf below the five-year average.
  • The CFTC report (as of April 23) showed the Managed Money long sector reducing positions by 3,856 contracts, while the Managed Money short position substantially increased, gaining 28,570 contracts. These additional increases in the short positions occurred when prices broke below the three-year support area at $2.522.
  • The expiration of the May contract conformed to the tendency of contract expirations for over two years (excluding April 2019), with a rally into expiration and prices trading between $2.439 and $2.580. Even with that brief rally, the market internals maintain a bearish to neutral bias for the week. Volume declined from the previous week and open interest declined with the expiration, which is a normal tendency. With the bounce-off of support, the market has softened from the over-sold momentum levels.
  • The market clearly rebuffed the potential expiration below the long-term support area at $2.522, instead choosing to expire at $2.566, just below the highs of the week. The rally off the lows left a bullish weekly reversal. The June contract followed the trend, reversing from the lows of the contract’s history at $2.477. While the May and June contracts traded to new lows last week, the 12-month running strip and winter 2019-2020 strips did not reach new lows, suggesting that the market is in the process of rejecting significantly lower prices. The seasonal expectation for the near term (early summer) is supportive for a price rebound. After last week’s reversal, the June contract should test resistance between $2.653 and $2.695 before June’s expiration. Should the bears regain control of the bias, last week’s June low at $2.477, followed by the low of last week at $2.439, should find buyers.

NATURAL GAS LIQUIDS

  • Plans have been announced by Energy Storage Ventures and Appalachia Development Group to create new ethane storage facilities in Appalachia. These storage facilities are viewed as crucial for the area. As ethane production in the area continues to grow, storage facilities could help bring development of new petrochemical facilities in the area, taking advantage of low-priced ethane as a feedstock.
  • Prices were up across the board week over week. Ethane gained $0.008 to $0.235, with propane up $0.031 to $0.643, normal butane up $0.023 to $0.770, iso-butane up $0.021 to $0.768, and natural gasoline up $0.031 to $1.341.
  • US propane stocks increased ~1.0 MMBbl the week ending April 19. Stocks now sit at 57.8 MMBbl, roughly 22.1 MMBbl and 18.1 MMBbl higher than the same week for April 2018 and April 2017, respectively.

SHIPPING

  • Waterborne crude imports to the US jumped last week with increases across PADDs 1, 3, and 5. DrillingInfo’s tracking of these waterborne imports from customs manifests shows that overall imports nearly reached 4 MMBbl/d. The 3.994 MMBbl/d of imports was the highest level since the week ending February 15. PADD 3 imports rose to 2.2 MMBbl/d, the highest since that same week in February when imports reached 2.5 MMBbl/d. The increase in PADD 3 imports was driven by higher than normal levels of imports from both Russia and Colombia, as well as imports from Kuwait. The LOOP terminal was active, receiving cargoes from Mexico, Iraq, and Kuwait.
  • Imports from Colombia have increased recently, with monthly imports into PADD 3 on pace to be the highest since the beginning of 2017. We are also seeing Russian Urals crude arrive more frequently, and these imports are consistently going to Phillips 66 Lake Charles.