Oil & Gas Prices - Mar 14

[dan_s]

Opening Prices:
> WTI is down $4.43 to $104.90/bbl, and Brent is down $4.12 to $108.55/bbl.
> Natural gas is down -10.1c to $4.624/MMBtu.

AEGIS Notes
Oil

Oil traded lower Monday morning as Ukrainian and Russian negotiations showed some signs of being more substantive (BBG)
> The two nations will discuss a potential ceasefire with an immediate withdrawal of troops and security guarantees, Ukraine negotiator Mykhalio Podolyak said
> The prospect of Iranian oil quickly re-entering an already tight oil market was clouded on Friday after talks were suspended

Money managers reduced their net-long position in Brent by the most since ICE started publishing the data in 2011 (Bloomberg)
> Hedge funds cut Brent net-longs by 97 lots
> Long positions were cut by almost 64k contracts last week, the biggest reduction since October 2018

An increase in Covid cases spur demand destruction worries in China
> China placed the 17.5 million residents of Shenzhen into lockdown for at least a week
> iPhone maker Foxconn halted its Shenzen operations
> The Guangdong province is a manufacturing powerhouse and accounts for 11% of GDP or $1.96 trillion

Natural Gas

Gas futures are trading lower this morning, with the prompt contract down 10.1c near $4.624
> Lower-48 dry gas production is down by another 0.4 Bcf/d this morning, near 91.2 Bcf/d, its lowest level in weeks
> Flows at Calcasieu Pass are around 0.787 Bcf/d, its highest mark yet
> Weather forecasts worsened over the weekend, with the March gas-weighted heating degree day forecast losing 3 HDDs to bring the total to 543 HDDs

Germany's finance minister open to oil, gas drilling in the North Sea
> Under the coalition deal between Chancellor Olaf Scholz's Social Democrats, the Greens, and Lindner's Free Democrats (FDP), Germany will not grant any new permits for oil and gas drilling in the North Sea beyond the existing framework
> Germany, which depends on Russia for 2/3 of its oil gas imports, is trying to boost its reliance on alternative energy sources < More wind and solar = more power outages.

[dan_s]

Closing Prices:
> Prompt-Month Henry Hub (Apr 22) was down $-0.067 on the day, to settle at $4.658
> Prompt-Month WTI (Apr 22) was down $-6.32 on the day, to settle at $103.01

All my forecast/valuation models are based on WTI averaging $90/bbl in Q1 and $100/bbl in Q2. For HH natural gas my forecast are based on $4.25/MMBtu in Q1 and $4.00/MMBtu in Q2.
IMO there is not going to be a cease fire in Ukraine anytime soon, but even if there is a quick resolution of the conflict this world is still short oil.