Oil & Gas Prices - Oct 4

[dan_s]

Opening Prices:
> WTI is up 47c to $76.35/Bbl, and Brent is up 57c to $79.85/Bbl. AEGIS: The trend is UP. Buyers will remain in control above $74.90. A weekly close below $69.51 will change the trend.
> Natural gas is up 20.2c to $5.821/MMBtu. AEGIS: The trend is UP and away. A change in trend would require a weekly close below $4.74. Buyers are in Control above $5.73.

AEGIS Notes:
Oil

Brent crude remained near $80/Bbl Monday morning as OPEC+ plans to discuss its production policy amid a tight oil market
OPEC+ will be reviewing their plan to continue hiking production 400MBbl/d
OPEC+'s JMMC recommends 400-MBbl/d supply hike; Crude prices surge to highest level since 2014
Many analysts believe the group will affirm their plan, while some OPEC+ members have said the cartel is looking at boosting output by more than 400 MBbl/d

Money Manager net-long positions in Brent rose to 329k lots, the highest since mid-March (CFTC)
Brent swap dealer short positions climbed 21k lots to 110k, highest since August 2020

U.S. drilling rigs rose by seven for the week ending October 1 (Baker Hughes)
Oil-directed rigs accounted for all seven of the increase as gas rigs stayed flat at 99 < It amazes me that some of the gassers have not added more rigs. Limited pipeline capacity in the Marcellus/Utica is probably the reason, but the Haynesville (CRK & GDP) has ample takeaway capacity.
Oil rigs now stand at 428, up 239 from a year ago < Since we are running out of DUC wells to complete, U.S. oil production will not be going up much from where it stands today until we get over 500 rigs drilling for oil.

Natural Gas

The prompt-month (Nov ’21) Henry hub contract is trading 20.2 higher this morning, near $5.821/MMBtu
> Options market signals prices may have room to run
> The 30-day risk reversal, which measures the difference in costs between the 25-delta calls and corresponding puts, is at its highest seasonal level in over a decade
> Further adding to bullish sentiment, long call and short put options have seen a surge in activity

European gas prices climb back toward a record as European inventories remain low
> According to Bloomberg, European energy markets are entering “what is likely to be the most challenging winter on record,” which could send gas prices into “overdrive.” < IMO we will see European and Asian gas prices for LNG over $50/MMBtu in November.
> Europe’s gas inventories are at their lowest level for this time of year in over a decade
> Europe is also struggling to source enough LNG as Chinese buyers have been securing cargoes “at any cost.”
> Both TTF and JKM prices reached a record high last week

[dan_s]

Closing Prices:
> WTI prompt month (NOV 21) was up $1.74 on the day, to settle at $77.62/Bbl.
> NG prompt month (NOV 21) was up $0.147 on the day, to settle at $5.766/MMBtu.

The Wall Street Gang is rotating lots of money into Upstream Oil & Gas companies. Since there are so few of them, our Sweet 16 is drawing lots of attention.
The Sweet 16 are still trading at a very low multiple of operating cash flow per share; less than 4X average for the group. In the "Good Old Days" when I work at Hess, any upstream company trading at less than 6X operating CFPS was on our "Takeover List".