Oil & Gas Prices - Sept 16

[dan_s]

Opening Prices:
> WTI is down $0.12 to $84.98/bbl, and Brent is up $0.25 to $91.09/bbl. < WTI was up $0.95 to $86.05 at the time of this post.
> Natural gas is down -30.3c to $8.021/MMBtu.

AEGIS Notes
Oil

Oil is set for a third weekly decline
Fears of significant rate hikes that are expected to stifle global economic growth and fuel demand still weigh on oil prices
U.S. Dollar is holding near last week's high above 110, its highest since 2002
A more expensive dollar can cause foreign buyers of dollar-denominated commodities to pay more for the same amount of goods

China's refineries processed 12.64 MMBbl/d of crude in August, the lowest volume since March 2020 (BBG, Reuters)
China's crude processing increased from July (12.53 MMBbl/d) to August by 0.9% but decreased year over year by 6.5%, according to the National Bureau of Statistics
China's fuel demand has been severely affected this year as Beijing's strict COVID-19 control measures hindered economic growth and mobility
Additionally, the IEA sees China's oil demand dropping by 0.420 MMBbl/d, or 2.7% this year, its largest annual drop in oil demand since 1990
The projected decline in China prompted the IEA to trim the global oil demand forecast by 0.110 MMBbl/d to 2 MMBbl/d while keeping its 2023 growth forecast of 2.1 MMBbl/d

Germany took control of a major refinery owned by Russian oil giant Rosneft on Friday, taking a step toward ensuring energy supply and seizing control of their energy industry (BBG)
Three refineries are part of the Rosneft German unit, and this move coincides with heightened tensions between Germany and Russia as Berlin plans to stop buying crude from Moscow by the end of the year
Two of the refineries process almost 12% of Germany's total crude, and an update is expected from Germany's economic minister and chancellor today
The nation is also in talks to take over Uniper SE and two other large gas importers in a step to avoid the collapse of its energy market, according to people familiar with the matter

Natural Gas

Prompt month natural gas prices are down by 3.5%, following yesterday's 9% decline
Gas prices have declined by 14% from Wednesday's intraday high < HH gas price is just back to where it was on Sept 12. Nothing I saw this week justified the spike to over $9.00, so this is just a move "back to reality".
Weather forecasts are indicating temperatures well above the 10-year normal for this week, while the following week should see temperatures fall below the 10-year normal < Any "winter like" weather in October should cause ngas price spikes.
Production hit a 99 Bcf/d year-to-date high two weekends ago but has failed to hit that mark since. AEGIS notes that associated and dry gas production remain the largest bearish risk to gas prices for the foreseeable future
Yesterday the EIA reported a larger than expected storage build of 77 Bcf, bringing the total amount of working gas in storage to 2,771 Bcf, a 354 Bcf deficit to the five-year average < The 77 Bcf build was below the 5-year average for the same week.

More gas rigs are in operation now than before the pandemic (EIA)
U.S. natural gas producers have more drilling rigs active now than at the beginning of the Covid-19 pandemic in 2020
According to Baker Hughes, 112 gas-directed rigs were operating in late January of 2020, while currently, there are 166 gas rigs in operation
Most of the growth in gas-directed rigs has come from the Haynesville basin, which has seen the number of rigs grow by more than 50% < The Haynesville has plenty of pipeline takeaway capacity and direct access to the LNG export facilities along the Gulf Coast, which is why Comstock Resources (CRK) is the top preforming stock in our Sweet 16.
The Appalachian rig count is slightly lower than in 2020
The EIA expects the number of rigs to grow, and production to average 100.5 Bcf/d during 2023

[SergioSays]

I think the nat gas spike to $9 was on fear of a protracted railroad labor strike would require a call on natty. Once they settled, that scenario closed.

[dan_s]

I just took a look at the NYMEX Strip for HH natural gas.
For 2023:
> Today Q1 NYMEX contracts average $7.75
> APR23 to DEC 2023 are all over $5.50

If I were to raise my 2023 natural gas price to $6.00/mcf, it would significantly impact my valuations for all five of our gassers. For example, it would increase Antero Resources (AR) operating cash flow by close to $800 million to $5.0 billion ($17.27/share), with FCF going over $4 billion.

If we have a colder than normal winter (La Nina winters usually are), all of the gassers could double for us between now and Q1 2023 sometime.

[dan_s]

Chevron CEO Warns Americans to Brace for Higher Natural Gas Prices This Winter

Read More: https://www.theepochtimes.com/chevron-c ... =ZeroHedge

[dan_s]

Closing Prices:
> Prompt-Month WTI (Oct 22) was up $0.01 on the day, to settle at $85.11
> Prompt-Month Henry Hub (Oct 22) was down $-0.560 on the day, to settle at $7.764

Just remember that we are in the "Shoulder Season" for natural gas. There will be large storage builds, but so far they are below the 5-year average builds.