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Today we only have time for a flash-blog
Longer term readers may recall our reports quire a few months ago about leaks from a Californian gas storage operation called Aliso Canyon – which required an intervention well to be drilled to fix an old well that was leaking methane (much to the delight of California’s legal community).
Recent news reports indicate that there are still problems at Aliso Canyon – that have potentially significant negative consequences for the State in terms of, for instance, the need for the State’s oil refineries to have a reliable source of gas in order to keep operating; powering gas fired generators during the summer’s air-conditioner induced high gas demand, etc.
The news reports however are confusing – they seem to treat Aliso Canyon is a producing gas field not a storage asset. However, it is the key capability of the latter that the State is missing – major and reliable deliverability when required, not gas the commodity per se.
If the potential problems arise, it will in fact send a political and economic signal that Aliso Canyon is an even more valuable asset than previously thought (and raised prices might then follow).
Crude prices jumped 2% overnight (and through the US$50 barrier), as last minute polls (there are no exit polls) indicated that the Brexit vote was favouring the status quo. Brent closed at US$51.09 and WTI at US$50.11.
Reports of yet another pipeline bombing in Nigeria, notwithstanding recent peace talks, also assisted the bulls.
Henry Hub closed up 1% at US$2.70.
LNG and international gas
The Indonesian Government has recently flagged plans to expand its re-gasification capacity across the Archipelago nation to have 11 floating storage and re-gasification units (FSRUs) by the end of this decade. These are required to fuel a planned large expansion of a gas fired electricity generation fleet.
This sort of market development, although likely to be plagued by delays, will be welcomed on the LNG supply side as part of a growing global wave of smaller scale demand needs, rather than the traditional large slabs of Japanese and South Korean demand.
Quote of the day
Following on from yesterday, we have another quote from The Big Short, which could also be applied to the oil market:
“Charlie and Jamie had always sort of assumed that there was some grown-up in charge of the financial system whom they had never met; now, they saw there was not.”
(Substitute “Saudi Arabi” for “grown-up” and “oil” for “financial”….)