Enjoy & reap.
https://www.gorozen.com/commentaries/3q2023
Well worth an hour to read and digest. Pretty comprehensive update.
Latest Goehring & Rozencjag piece
Re: Latest Goehring & Rozencjag piece
Great quote: "What if the IEA projections have erred and energy demand continues to surge in the coming years? After all, the IEA has a history of being ridiculously pessimistic in its demand forecasts. The agency has underestimated demand in 12 of the past 14 years by an impressive 820,000 b/d on average (excluding COVID-impacted 2020)."
In my opinion, IEA is now a political organization.
"The IEA is leading the bearish chorus. In their most recent World Energy Outlook 2023, published in October, the IEA lays out its “Announced Pledges Scenario” for global energy demand. Between 2022 and 2030, the IEA estimates demand (which it oddly calls Total Energy Supply [TES]) will fall by 1%. By 2040, it will fall by 3.2%. These numbers are not possible given our understanding of global energy consumption. Our models tell us the IEA uses fundamentally flawed mythologies that introduce a systematic downward bias. Their bias has been apparent since at least 2010. Over that time, the IEA has chronically underestimated global oil demand in twelve of the fourteen years (including COVID-impacted 2020). Excluding 2020, the IEA increased demand by an incredible 800,000 b/d on average from its initial expectation. If the IEA’s error were a country, it would be the world’s 21st
largest oil consumer."
In my opinion, IEA is now a political organization.
"The IEA is leading the bearish chorus. In their most recent World Energy Outlook 2023, published in October, the IEA lays out its “Announced Pledges Scenario” for global energy demand. Between 2022 and 2030, the IEA estimates demand (which it oddly calls Total Energy Supply [TES]) will fall by 1%. By 2040, it will fall by 3.2%. These numbers are not possible given our understanding of global energy consumption. Our models tell us the IEA uses fundamentally flawed mythologies that introduce a systematic downward bias. Their bias has been apparent since at least 2010. Over that time, the IEA has chronically underestimated global oil demand in twelve of the fourteen years (including COVID-impacted 2020). Excluding 2020, the IEA increased demand by an incredible 800,000 b/d on average from its initial expectation. If the IEA’s error were a country, it would be the world’s 21st
largest oil consumer."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Latest Goehring & Rozencjag piece
G&R's Take on Oil and Gas Prices:
Oil
"Oil rebounded strongly in the third quarter. Sales from the US Strategic Petroleum Reserve ended in the last week of June, and we believe it was no coincidence that oil bottomed simultaneously. The West Texas Intermediate oil price slumped to $67 per barrel on June 28 before surging almost 40% over the following twelve weeks. By the end of September, WTI almost reached $95. Slackening SPR sales were only partially responsible for the oil price rally. Oil demand continued to grow far above expectations. For all the talk of recession and Chinese slowdowns, demand continued to surpass initial expectations. Since the beginning of 2023, the IEA has revised 2023 demand estimates higher by 600,000 b/d. Led by an impressive
1.2 mm/b demand surge in China, the IEA expects global demand to grow by 2.3 mm b/d this year. As investors realize demand is here to stay, prices should rally sharply.
Natural Gas
"After rebounding in the second quarter, North American and international natural gas rallied. US natural gas rose 5%, while European and Asian natural gas rose 8% and 16%, respectively. Both European and Asian natural gas currently sit at $16 per MMBtu. Oil trades at $15 per MMBtu when converted into natural gas equivalency. With Henry Hub gas at only $3.10 per MMBtu, the US gas molecule trades at an incredible 80% discount to global energy prices. We have written that we believe North American natural gas prices will converge with international prices.
Since first writing about “convergence” in our 1Q22 essay “The Gas Crisis is Coming to America,” the trade has been pushed out because of North America and Europe’s highly mild winter weather. The Freeport LNG export terminal also caught fire in 2022, knocking out two bcf per day of LNG exports, or a significant 2% of total US demand. As US inventories swelled, North American natural gas prices fell nearly 80% from the 2022 peak of almost $10 per MMBtu. We believe these headwinds were temporary and are now behind us. Excess US inventories have primarily been worked off, while operators expect to add six bcf/d of new LNG export capacity in 2024.
Convergence is getting closer, leaving us wildly bullish on US natural gas. Seldom are we presented with a commodity whose price can rise five-fold in a very short period. Investors should take note."
Oil
"Oil rebounded strongly in the third quarter. Sales from the US Strategic Petroleum Reserve ended in the last week of June, and we believe it was no coincidence that oil bottomed simultaneously. The West Texas Intermediate oil price slumped to $67 per barrel on June 28 before surging almost 40% over the following twelve weeks. By the end of September, WTI almost reached $95. Slackening SPR sales were only partially responsible for the oil price rally. Oil demand continued to grow far above expectations. For all the talk of recession and Chinese slowdowns, demand continued to surpass initial expectations. Since the beginning of 2023, the IEA has revised 2023 demand estimates higher by 600,000 b/d. Led by an impressive
1.2 mm/b demand surge in China, the IEA expects global demand to grow by 2.3 mm b/d this year. As investors realize demand is here to stay, prices should rally sharply.
Natural Gas
"After rebounding in the second quarter, North American and international natural gas rallied. US natural gas rose 5%, while European and Asian natural gas rose 8% and 16%, respectively. Both European and Asian natural gas currently sit at $16 per MMBtu. Oil trades at $15 per MMBtu when converted into natural gas equivalency. With Henry Hub gas at only $3.10 per MMBtu, the US gas molecule trades at an incredible 80% discount to global energy prices. We have written that we believe North American natural gas prices will converge with international prices.
Since first writing about “convergence” in our 1Q22 essay “The Gas Crisis is Coming to America,” the trade has been pushed out because of North America and Europe’s highly mild winter weather. The Freeport LNG export terminal also caught fire in 2022, knocking out two bcf per day of LNG exports, or a significant 2% of total US demand. As US inventories swelled, North American natural gas prices fell nearly 80% from the 2022 peak of almost $10 per MMBtu. We believe these headwinds were temporary and are now behind us. Excess US inventories have primarily been worked off, while operators expect to add six bcf/d of new LNG export capacity in 2024.
Convergence is getting closer, leaving us wildly bullish on US natural gas. Seldom are we presented with a commodity whose price can rise five-fold in a very short period. Investors should take note."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group