Oil & Gas Prices - Dec 8

[dan_s]

Opening Prices:
> WTI is up 29c to $72.34/Bbl, and Brent is up 39c to $75.83/Bbl.
> Natural gas is up 15.5c to $3.863/MMBtu.

AEGIS Notes
Oil

Oil prices were trading flat Wednesday morning after a two-day rally fueled by easing concerns about the new Omicron variant
> Industry data from the API showed that crude inventories rose by 2.4 MMBbl last week – the biggest increase since February
> U.S. oil drillers will need half a decade to resume pre-pandemic production levels, according to Scott Sheffield, CEO of Pioneer Natural Resources < IMO the notion that U.S. oil production would snap back to 13 million bpd after all the damage done by the pandemic in 2020 and 1H 2021 was nothing but wishful thinking. It will take lots of time for the oilfield services sector to "heal" + the more we depend on high decline rate horizontal shale wells for oil production, the more new wells we will need each year just to hold production flat. As I pointed out in Monday's podcast, the upstream companies won't have a big inventory of Tier One DUC wells to complete in 2022.

Saudi Arabia based International Energy Forum said companies need to raise investment in oil and natural gas production to $523 billion a year by the end of this decade to prevent a surge in energy prices (Bloomberg)
> The IEF said spending on oil and gas projects slumped 30% to $309 billion in 2020 and had only slightly recovered this year. The consultancy's comments are in line with those of Saudi Aramco, whose CEO on Monday said there could be ‘chaos’ unless governments stopped shunning investment in fossil fuels. < The fear mongering Climate Change Wackos won't let up and IMO this world is heading to a significant energy shortage sometime in the next two years thanks to lack of investment in exploration.

Natural Gas

Gas prices are trading higher this morning, with the prompt contract gaining 15.5c to $3.863
> Lower-48 production continued its slide, losing 1 Bcf/d to bring the lower-48 total to 93.6 Bcf/d. It is now down by nearly 2.9 Bcf/d from its recent-high reached on November 26 < Upstream companies "opened the valves" on their gas wells to harvest some gas prices over $5/mcf, but they can't leave the wells wide open for long without reducing long-term production.
> LNG feedgas demand is back above 11.72 Bcf/d this morning, good for a 0.68 Bcf/d day-over-day increase
> Cheniere also announced that the first cargo from its new production unit (Train 6) left the terminal today. The only additional export capacity that will come online until 2024 is Calcasieu Pass, which is expected in 1H 2022
> The March 22-April 22 spread has stabilized near 10c
> The gas-weighted heating degree day total lost 6.8 HDDs overnight, but prices have rallied in spite of the more bearish forecast. < Old Man Winter is putting together a big cold wave for Christmas week.
> Forecasts for the northeast region saw significantly cooler forecasts, which may explain the buying pressure this morning

European gas prices have rallied as the U.S. weighs new sanctions against Russia if they invade Ukraine < Team Biden never stops coming up with bad ideas. Germans will be burning furniture for space heating if natural gas flows from Russia are cut off.
> Yesterday, the prompt-month (Jan ’22) TTF contract gained 6.4%, or $1.90, to finish at $31.564
> The Nord Stream 2 pipeline is at the top of the list in regards to potential sanctions targets. Russia has amassed nearly 170k troops along Ukraine's border
> Further, European gas is trading even higher this morning as supply from a huge gas field in Norway is down by 13% due to an unplanned outage. The outage length is uncertain.