AMERICAS OIL: U.S. gas production poised for rebound as oil growth stalls: Kemp
Mar-05 16:33
U.S. gas production poised for rebound as oil growth stalls: Kemp
- Analyst John Kemp writes, “sharply diverging outlooks for U.S. oil and gas production explain why hedge fund positions at the end of February were exceptionally bullish for gas but near a record low for oil.”
- Total crude and condensates production from the Lower 48 states excluding federal waters in the Gulf of Mexico averaged 11.2 mb/d in December 2024.
- Lower 48 output was only marginally below the record high the previous month but had increased by less than 0.2 mb/d compared with the same month a year earlier.
- Growth has steadily decelerated from around 1 mb/d towards the end of 2023 as the shock caused by Russia’s invasion of Ukraine in February 2022 has faded.
- Oil drilling and production generally react to price changes with a delay of about 5 months and 12 months, respectively.
- Unlike oil, U.S. gas production is likely to increase significantly in 2025, after prices more than doubled in real terms from the multi-decade low in Q1 2024.
- Dry gas production declined slightly to an average of 103.2 bcf/d in 2024 from 103.6 bcf/d in 2023.
- Falling production, combined with record consumption from gas-fired generators, growth in exports, and the coldest winter for six years, has tightened supplies sharply.
- Surplus inventories in March 2024 inherited from the very mild winter of 2023/24 had been transformed into a large and widening deficit by February 2025.
- So far, there has been no measurable increase in drilling, but production has been climbing steadily, likely as producers complete already-drilled holes and increase flow rates from wells in production.
- Dry production increased to an average of 105.7 bcf/d in December 2024, the highest for 10 months, up from a low of 101.8 bcf/d in September 2024.
- Production will have to increase significantly in 2025 to stem the unsustainable inventory depletion – the only question is how high prices have to rise to induce the necessary response and choke off some gas use by generators.
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FED: US TSY 26W BILL AUCTION: HIGH 4.155%(ALLOT 95.65%)
Feb-03 16:32
- US TSY 26W BILL AUCTION: HIGH 4.155%(ALLOT 95.65%)
- US TSY 26W BILL AUCTION: DEALERS TAKE 24.87% OF COMPETITIVES
- US TSY 26W BILL AUCTION: DIRECTS TAKE 7.24% OF COMPETITIVES
- US TSY 26W BILL AUCTION: INDIRECTS TAKE 67.89% OF COMPETITIVES
- US TSY 26W BILL AUCTION: BID/CVR 3.04
FED: US TSY 13W BILL AUCTION: HIGH 4.220%(ALLOT 36.23%)
Feb-03 16:32
- US TSY 13W BILL AUCTION: HIGH 4.220%(ALLOT 36.23%)
- US TSY 13W BILL AUCTION: DEALERS TAKE 46.43% OF COMPETITIVES
- US TSY 13W BILL AUCTION: DIRECTS TAKE 5.62% OF COMPETITIVES
- US TSY 13W BILL AUCTION: INDIRECTS TAKE 47.95% OF COMPETITIVES
- US TSY 13W BILL AUCTION: BID/CVR 2.65
EUROPEAN INFLATION: Services Inflation Momentum At 3.5 Year Low
Feb-03 16:26
Eurozone services inflation momentum decelerated for the sixth consecutive month in January, according to the ECB’s seasonally adjusted data. Sequential price growth was 0.37% M/M (vs 0.32% prior), but 3m/3m growth eased to 2.45% (vs 2.61% prior), the lowest since September 2021.
- Analysts have questioned the reliability of the ECB’s seasonal adjustment methodology in recent months, and the uncertain nature of the January print (e.g. due to start of year price resets and weight changes) means some caution is still required when interpreting the latest data.
- However, at face value, the reading suggests ECB expectations for NSA Y/Y services readings to moderate during the course of this year remain intact.
- Details on the underlying drivers of the 3.9% Y/Y NSA services print (vs 4.0% prior) will be available in the January final HICP reading on Feb 24. President Lagarde has highlighted start of year price resets in categories like insurance as important to analyse in Q1.
- Non-energy industrial goods prices rose just 0.06% M/M SA, corresponding to a 0.59% 3m/3m rate (vs 0.44% prior).
- Together, this meant core inflation momentum eased to a 12-month low of 1.77% (vs 1.83% prior).
