Oil & Gas Prices - Oct 12

[dan_s]

Opening Prices:
> WTI is down $0.44 to $88.91/bbl, and Brent is down $0.24 to $94.05/bbl.
> Natural gas is up 12.3c to $6.719/MMBtu.

AEGIS Notes
Oil

Oil trades below $90/Bbl amid concerns about weaker demand
Major Chinese cities, including Shanghai and Shenzhen, ramped up COVID testing and introduced new curbs amid a spike in infections
China's "zero Covid" policy weighed on the market amid anticipation of weaker fuel demand

Further weighing on oil prices, the IMF warned on Tuesday that the risk of a global recession was increasing
The fund cut its global growth forecast for 2023, citing the combined effects of rising interest rates and inflation
The U.S. Dollar strengthened after the IMF forecast
An expensive dollar (DXY Index) can cause foreign buyers of dollar-denominated commodities to pay more for the same amount of goods

Poland’s pipeline operator, PERN, discovered a leak in a crude pipeline carrying oil from Russia to Europe. According to Polish authorities, the leak was accidental (BBG)
Poland’s lead investigator in charge of strategic energy infrastructure Mateusz Berger said that the explosion "can't be compared" to the Nord Stream incident and that "it was probably an accident."
The leak has affected one of two strands of the northern leg of the Druzhba pipeline network, which supplies Germany and Poland
European authorities are on high alert for any attacks on infrastructure since the explosions on the Nord Stream gas pipelines in September

The Biden administration yesterday warned that there would be consequences for Saudi Arabia over OPEC+ oil production cuts announced last week (BBG)
“There’s going to be some consequences for what they’ve done with Russia,” said President Biden in an interview with CNN
The President further said that it is time for the U.S. to reevaluate its relationship with Saudi Arabia < This is beyond stupid!
OPEC+'s decision was "purely economic," according to Saudi Foreign Minister Prince Farhan, who also sought to defuse escalating tensions by saying that Riyadh and the US have a "strategic partnership."
Additionally, Putin said yesterday that their decisions are "not targeted at anyone" and that they have no intention of "causing issues for anyone."

Natural Gas

Natural gas prices are higher this morning by 2.25% in the prompt month
Yesterday prices rallied by 2.5% - Just talking about prompt again

Gulf of Mexico gas production is expected to continue to decrease (EIA)
Gas production in 2021 grew by 3.5% over 2020 levels, driven by higher prices, with most of the production increases originating in the Appalachian, Permian, and Haynesville regions, while production from the Gulf of Mexico decreased by 9%
Gas production in the gulf has been trending lower due to aging wells, the high cost associated with offshore drilling, and an increased focus on oil production
The Gulf of Mexico represented only 2% of total US gas production in 2021, and the EIA expects this trend of lower production to continue

China to cut winter LNG purchases (Reuters)
As demand growth in China has fallen to its lowest level since 2002, China's LNG importers are reducing their purchases
This will leave more gas supply for Europe this winter, which could ease prices
LNG imports in the fourth quarter of 2022 are expected to decline by a total of 791 Bcf or 20%

[dan_s]

EIA's weekly Petroleum Report will be issued on Thursday this week because of the holiday on Monday. They will also issue the natural gas storage report on Thursday.

I will be traveling to Tulsa tomorrow, but I will check in during the late afternoon.

[dan_s]

Closing Prices:
> Prompt-Month WTI (Nov 22) was down $-2.08 on the day, to settle at $87.27
> Prompt-Month Henry Hub (Nov 22) was down $-0.161 on the day, to settle at $6.435

The only Sweet 16 stock that was down today was OVV. Somewhat "weird" trading day.

All of our model portfolio companies are going to report good Q3 results. They won't be as good as Q2 results, but still very good.