Are bears the new bulls?

Probably not, but with West Texas Intermediate crude oil languishing below $50 per barrel for the past three weeks, it might be time for an “I’ve-been-on-my-back-so-long-everything-is-looking-up approach.”

“If there is anything bullish about crude prices it is that the market is so bearish, making it vulnerable to upside surprises,” said En*Vantage analysts in a recent report. “Also the bearish mood of the market should provide incentives for OPEC and non-OPEC to extend production cuts, led mainly by Saudi Arabia and Russia.”

But let’s not forget Venezuela. A piece in Forbes by energy historian Ellen R. Wald described the daily incremental meltdown of the country. Venezuelans are desperate for fuel yet unable to find a way to arrange payment for 7 million barrels loaded onto 20 tankers anchored off its coast.

In Iran, tensions are rising as elections approach. In fact, global political instability is a big reason that En*Vantage still expects crude prices to rise into the $50s this summer and the analysts expect Saudi Arabia (leading OPEC) and Russia (leading non-OPEC countries) to respond by extending their crude production cuts.

Lower crude oil prices will put a damper on contracted natural gas prices in Asia and Europe, they said, but that could be countered by a hot summer in the U.S. The National Weather Service forecasts a 50% to 60% chance of warmer-than-normal temperatures in the Southeast and East Coast from May through July.

The stress includes NGL as well.

“Lower global NGL prices could lead to lower U.S. exports as arbs close and while we are expecting higher NGL recoveries going forward (ethane in particular) a stumble here could lead to a reversal of high recoveries and more put back into the U.S.-based natural gas market,” En*Vantage said.

Ethane prices rose at both the Mont Belvieu, Texas, and Conway, Kan., hubs last week, with margins widening as well. The Mont Belvieu price was its highest since mid-February. While En*Vantage estimates that ethane rejection in February was still about 526,000 barrels per day (Mbbl/d), that figure is 20.2% below the estimate for January.

Propane prices also rose last week at both hubs, but the rest of the NGL—except for a slight increase in isobutane at Conway—suffered a drop. The price of the hypothetical Frac Spread: Low Oil Bearable With Bullish Prices On Way NGL barrel moved little in the last week, but was still 22.6% the year-ago price at Mont Belvieu and 20% above at Conway.

Storage of natural gas in the Lower 48 increased by 45 billion cubic feet (Bcf) in the week ended May 5, the U.S. Energy Information Administration reported. The increase, well below the Bloomberg consensus of 55 Bcf and the Wells Fargo estimate of 52 Bcf forecast, resulted in a total of 2.301 Tcf. The figure is 13.9% below the 2.615 Tcf figure at the same time in 2016 and 13.6% above the five-year average of 2.026 Tcf.

Joseph Markman can be reached at jmarkman@hartenergy.com and @JHMarkman.